5. Suppose that Capsule Corporation and Red Ribbon Company are producers of spaceships. In their production processes, each firm emits 50 units of pollution. Now, the government wants to reduce smoke emissions by 40% by issuing tradable permits. The cost of abatement of Capsule Corporation is Php 50 per unit of pollution, while the cost of abatement of Red Ribbon Company is Php 30. Suppose the tradable permits sell at Php 40 and the government allocates the permits equally between the two firms. a. If Red Ribbon Company sells 10 permits to Capsule Corporation, what is the total cost in achieving the goal of reducing emissions by 40%? Instead of using tradeable permits, the government regulates the firms by forcing them to emit 30 units of pollution each. What is the total cost of this policy? What policy is more efficient to implement, the tradeable permits or the government regulation? b.

5. Suppose that Capsule Corporation and Red Ribbon Company are producers of spaceships. In their production processes, each firm emits 50 units of pollution. Now, the government wants to reduce smoke emissions by 40% by issuing tradable permits. The cost of abatement of Capsule Corporation is Php 50 per unit of pollution, while the cost of abatement of Red Ribbon Company is Php 30. Suppose the tradable permits sell at Php 40 and the government allocates the permits equally between the two firms. a. If Red Ribbon Company sells 10 permits to Capsule Corporation, what is the total cost in achieving the goal of reducing emissions by 40%? Instead of using tradeable permits, the government regulates the firms by forcing them to emit 30 units of pollution each. What is the total cost of this policy? What policy is more efficient to implement, the tradeable permits or the government regulation? b.

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 5PA

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3. generates pollution. The anmual demand for nuclear energy is given by QD = 300 - 2P. The annual market supply is given by QS = P. In both equations, P is the price in dollars per unit. For every unit of output produced, the industry emits ef one units of Consider a production of nuclear energy whose production process pollution. The marginal damage from each unit of pollution is given by Q. a) Find the equilibrium price and quantity in a market with no govemment intervention. b) Find the socially optimal quantity of the nuclear energy. What is the socially optimal market price? c) Suppose an emissions fee is imposed on producers. What emissions fee would induce the socially optimal quantity of the gossip
$ R с E -F5 % 5 6 OUL G Refer to Figure 10-7. This graph shows the market for pollution when permits are issued to firms and traded in the marketplace. The equilibrium number of permits is O a. 50. Ob. 1,000. O c. 2,000. O d. 100. Un PRICE (Dollars per unit) H & 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 F8 10 20 30 40 50 60 70 80 90 100 QUANTITY (Units of pollution) *.00 8 8 F9 Supply of Pollution Permits ( 9 JL U Demand for Pollution Permits F10 O --- ) O F11 + F12 PrtSc 1 J [ Insert
Figure 1 mc plant 1 $3.00 $2.00 나 mc plant 2 $1.00 25% 50% 75% $4.00 Marginal Cost (per ton) of pollution reductionton ○ a). $1.10 Ob). $0.90 Oc). $0.60 100% Assume now that each plant in Figure 1 normally emits 100 tons of pollutant (so a 50% reduction means a reduction of 50 tons.). Assume the plants are issued permits for 50 tons of pollutant. Plant 2 might agree to sell one permit to Plant 1 (and Plant 1 would agree to pay) a price of... O d). either (b) or (c) above Pollution reduction
3. generates pollution. The anmual demand for nuclear energy is given by QD = 300 - 2P. The annual market supply is given by QS = P. In both equations, P is the price in dollars per unit. For every unit of output produced, the industry emits of-one units of pollution. The marginal damage from each unit of pollution is given by Q. Consider a production of nuclear energy whose production process a) Find the equilibrium price and quantity in a market with no govemment intervention. b) Find the socially optimal quantity of the nuclear energy. What is the socially optimal market price? c) Suppose an emissions fee is imposed on producers. What emissions fee would induce the socially optimal quantity of the gossip
A steelmaking plant pollutes the air and water so % 5 O A. the marginal private cost of producing steel minus the marginal social cost equals the marginal external cost O B. the marginal private cost of producing steel equals the marginal external cost plus the marginal social cost OC. the marginal social cost of producing steel exceeds the marginal private cost by the amount of the marginal external cost O D. the marginal social cost of producing steel is less than the marginal private cost by the amount of the marginal external cost t 6 Oll y 887 7 O U * 8 19 ( O ✓ p T Next A
10. Understanding different policy options to correct for negativeexternalities Carbon dioxide emissions have been linked to degradation of air quality. The following table lists some potential regulations targeting the amount of airbome carbon dioxide. For each policy listed, identify whether it is a command-and-control policy (regulation), tradable permit system, corrective subsidy, or corrective tax. о Public Policy Command-and- Control Policy Tradable Permit System Corrective Subsidy Corrective Тах Trees take carbon dioxide out of the air and convert it to oxygen, so the govemment funds a tree-planting initiative by offering $440 to any citizen who plants a tree. 0 о The government charges factories $440 for every ton of carbon dioxide they emit о о The government orders every factory to adopt a new technology, which reduces carbon-dioxide emissions into the atmosphere. 0 ° ° о The government limits total carbon-dioxide emissions by all factories to 260,000 tons per ten years. Each…
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