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PRICE (Dollars per ton) 80 72 64 56 48 40 32 24 16 B Demand 0 25 50 75 100 125 150 175 200 225 250 QUANTITY (Millions of tons) Graph Input Tool Daily Demand for Pollution Rights Price 8 (Dollars per ton) Quantity Demanded (Millions of tons) 225 Suppose the government has determined that the socially optimal quantity of sulfur dioxide emissions is 125 million tons per day. One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. A tax (or price in this case) of $ of sulfur dioxide emitted will achieve the desired level of pollution. per ton Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to achieve the desired level of pollution. Instead, it auctions off pollution permits. Each permit entitles its owner to emit one ton of sulfur dioxide per day. To achieve the socially optimal quantity of pollution, the government auctions off 125 million pollution permits. Given this quantity of permits, the price for each permit in the market for pollution rights will be S The previous analysis hinges on the government having good information regarding either the demand for pollution permits or the optimal level of pollution (or both). Given that the appropriate policy (pollution permits or pollution taxes) can depend on the available information and the policy goal, consider the following scenario. Imagine that new research suggests that if manufacturers in a particular city reduced their emissions to 40 million tons of waste per year, the air quality would improve dramatically. If this is all the information the government has, which solution to reduce pollution is appropriate? Check all that apply. Pollution taxes Pollution permits

PRICE (Dollars per ton) 80 72 64 56 48 40 32 24 16 B Demand 0 25 50 75 100 125 150 175 200 225 250 QUANTITY (Millions of tons) Graph Input Tool Daily Demand for Pollution Rights Price 8 (Dollars per ton) Quantity Demanded (Millions of tons) 225 Suppose the government has determined that the socially optimal quantity of sulfur dioxide emissions is 125 million tons per day. One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. A tax (or price in this case) of $ of sulfur dioxide emitted will achieve the desired level of pollution. per ton Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to achieve the desired level of pollution. Instead, it auctions off pollution permits. Each permit entitles its owner to emit one ton of sulfur dioxide per day. To achieve the socially optimal quantity of pollution, the government auctions off 125 million pollution permits. Given this quantity of permits, the price for each permit in the market for pollution rights will be S The previous analysis hinges on the government having good information regarding either the demand for pollution permits or the optimal level of pollution (or both). Given that the appropriate policy (pollution permits or pollution taxes) can depend on the available information and the policy goal, consider the following scenario. Imagine that new research suggests that if manufacturers in a particular city reduced their emissions to 40 million tons of waste per year, the air quality would improve dramatically. If this is all the information the government has, which solution to reduce pollution is appropriate? Check all that apply. Pollution taxes Pollution permits

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter12: Environmental Protection And Negative Externalities
Section: Chapter Questions
Problem 10SCQ: Suppose a city releases 16 million gallons of raw sewage into a nearby lake. Table 12.8 shows the...
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PRICE (Dollars per ton) 80 72 64 56 48 40 32 24 16 B Demand 0 25 50 75 100 125 150 175 200 225 250 QUANTITY (Millions of tons) Graph Input Tool Daily Demand for Pollution Rights Price 8 (Dollars per ton) Quantity Demanded (Millions of tons) 225 Suppose the government has determined that the socially optimal quantity of sulfur dioxide emissions is 125 million tons per day. One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. A tax (or price in this case) of $ of sulfur dioxide emitted will achieve the desired level of pollution. per ton Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to achieve the desired level of pollution. Instead, it auctions off pollution permits. Each permit entitles its owner to emit one ton of sulfur dioxide per day. To achieve the socially optimal quantity of pollution, the government auctions off 125 million pollution permits. Given this quantity of permits, the price for each permit in the market for pollution rights will be S The previous analysis hinges on the government having good information regarding either the demand for pollution permits or the optimal level of pollution (or both). Given that the appropriate policy (pollution permits or pollution taxes) can depend on the available information and the policy goal, consider the following scenario. Imagine that new research suggests that if manufacturers in a particular city reduced their emissions to 40 million tons of waste per year, the air quality would improve dramatically. If this is all the information the government has, which solution to reduce pollution is appropriate? Check all that apply. Pollution taxes Pollution permits
Transcribed Image Text:PRICE (Dollars per ton) 80 72 64 56 48 40 32 24 16 B Demand 0 25 50 75 100 125 150 175 200 225 250 QUANTITY (Millions of tons) Graph Input Tool Daily Demand for Pollution Rights Price 8 (Dollars per ton) Quantity Demanded (Millions of tons) 225 Suppose the government has determined that the socially optimal quantity of sulfur dioxide emissions is 125 million tons per day. One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. A tax (or price in this case) of $ of sulfur dioxide emitted will achieve the desired level of pollution. per ton Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to achieve the desired level of pollution. Instead, it auctions off pollution permits. Each permit entitles its owner to emit one ton of sulfur dioxide per day. To achieve the socially optimal quantity of pollution, the government auctions off 125 million pollution permits. Given this quantity of permits, the price for each permit in the market for pollution rights will be S The previous analysis hinges on the government having good information regarding either the demand for pollution permits or the optimal level of pollution (or both). Given that the appropriate policy (pollution permits or pollution taxes) can depend on the available information and the policy goal, consider the following scenario. Imagine that new research suggests that if manufacturers in a particular city reduced their emissions to 40 million tons of waste per year, the air quality would improve dramatically. If this is all the information the government has, which solution to reduce pollution is appropriate? Check all that apply. Pollution taxes Pollution permits
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