EOC 11.04Two businesses, X and Y, each dump 20 tonnes of pollution into a creek. In an effort to reduce pollution, thegovernment will now require businesses to have a pollution permit to dump pollutants in the creek. Eachbusiness receives 10 pollution permits and they can use it to pollute or sell it to the other business (but losethe ability to pollute). To reduce pollution it costs business X $100 per tonne of pollutant eliminated and itcosts business Y $50 per tonne of pollutant eliminated. Once the two businesses have traded these permitswith each other, what is the likely outcome?Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.abusiness X emits 10 tonnes of pollutants and business Y emits 10 tonnes of pollutants.b business X no longer pollutes, and business Y will not lower the amount it pollutes.business X raises its pollution, and business Y will lower how much it pollutes.business Y no longer pollutes, and business X will not lower the amount it pollutes.P.

Tradable permits refers to the government licensing or power that the government allow them to make…

Answered: EOC 11.04 Two businesses, X and Y, each…

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 10PA

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Similar questions

How can high-income countries benefit from covering much of the cost of reducing pollution created by low-income countries?
What is a pollution charge and what incentive does it provide for a firm to take external costs into account?
In the Land of Purity, there is only one form of pollution, called gunk. Table 12.14 shows possible combinations of economic output and reduction of gunk, depending on what kinds of environmental regulations you choose. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the percentage reduction of gunk, and with the quantity of economic output on the vertical axis. Which choices display productive efficiency? How can you tell? Which choices show allocative efficiency? How can you tell? In the choice between K and L, can you say which one is better and why? In the choice between K. and N, can you say which one is better, and why? If you had to guess, which choice would you think is move likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice L or M? Why?
Refer to Table 12.2. The externality created by the refrigerator production was 100. However, once we accounted for both the private and additional external costs, the market price increased by only 50. If the external costs were 100 why did the price only increase by 50 when we accounted for all costs?
As the extent of environmental protection expands, would you expect the marginal benefits of environmental protection to rise or fall? Why or why not?
Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to the model to show the impact of the negative externality from second-hand smoking. (Hint: In this case it is the consumers, not the sellers, who are creating the negative externality.) Label the social optimal output and price as Fe and Qe. On the graph, shade in the deadweight loss at the market output.
Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. QS1 is the quantity supplied without social costs. QS2 is the quantity supplied with social costs. What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs, and then when we account for social costs. How does accounting for the externality affect the equilibrium price and quantity?
Is zero pollution an optimal goal? Way or why not?
A country called Sherwood is very heavily covered with a forest of 50,000 trees. There are proposals to clear some of Sherwoods forest and grow com, but obtaining this additional economic output will have an environmental cost from reducing the number of trees. Table 12.11 shows possible combinations of economic output and environmental protection. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the number of trees, and the quantity of economic output, measured in corn, on the vertical axis. Which choices display productive efficiency? How can you tell? Which choices show allocative efficiency? How can you tell? In the choice between T and R, decide which one is better. Why? In the choice between T and S, can you say which one is better, and why? If you had to guess, which choice would you think is more likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice Q or S? Why?
Would environmentalists favor command-and-control policies as a way to reduce pollution? Why or why not?
Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant. What information or data would you obtain to measure the external [not social] cost?
The rows in Table 12.7 show three market-oriented tools for reducing pollution. The columns of the table show three complaints about command-and-control regulation. Fill in the table by stating briefly how each market-oriented tool addresses each of the three concerns.

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