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Power stations emit sulfur dioxide as a waste product. This generates a cost to society that is not paid for by the firm; therefore, pollution is a negative externality of power production. Suppose the U.S. government wants to correct this market failure by getting firms to internalize the cost of pollution. To do this, the government can charge firms for pollution rights (the right to emit a given quantity of sulfur dioxide). The following graph shows the daily demand for pollution rights. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. 0 15 30 45 60 75 90 105 120 135 150 70 63 56 49 42 35 28 21 14 7 0 PRICE (Dollars per ton) QUANTITY (Millions of tons) Demand Graph Input Tool Daily Demand for Pollution Rights Price (Dollars per ton) 7 Quantity Demanded (Millions of tons) 135 Suppose the government has determined that the socially optimal quantity of sulfur dioxide emissions is 60 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 $ per ton of sulfur dioxide emitted will achieve the desired level of pollution. 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 tradable 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 60 million pollution permits. Given this quantity of permits, the price for each permit in the market for pollution rights will be $ . 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 (tradable permits or corrective taxes) can depend on the available information and the policy goal, consider the following scenario. Suppose the government knows the optimal quantity of pollution as well as how much it costs a particular polluting firm to reduce pollution at each quantity. If this is all the information the government has, which solution to reduce pollution is appropriate? Check all that apply. Corrective taxes Tradable permits
A local car dealer is advertising a standard 24-month lease of $1,150 per month for its sports car. The standard lease requires a down payment of $4,500, plus a $1,000 refundable initial deposit now. The first lease payment is due at the end of month..
If trying to sell a new accounting system that will reduce cost by 10%. Instead of pricing the product you give the cost as 50% of their cost savings. Describe the information assymetry and adverse selection problem and why soft selling is successful..
Hebron and Stack discuss the fragmentation of nations - the rise of smaller units within a nation. While this is certainly happening at the same time as increasing market integration and globalization, is this a product of globalization or is mere..
Although airline schedules and cost are important factors for business travelers when choosing an airline carrier, a USA Today survey found that business travelers list an airline’s frequent flyer program as the most important factor.
An improvement in production technology for a specific good will cause a(n):
Conduct a comparative DuPont analysis of two companies. Using a search engine, find one large corporation included in the S&P 500. Then, find one of its largest competitors.
Recessions often are related to the fact that consumers consume less of many of the goods they typically consume. During a recession unemployment typically increases. Relate this behavior to the budget line and indifference curves that we studied.
The North American Free Trade Agreement (NAFTA) is a trade agreement between the United States, Canada, and Mexico whose purpose is to eliminate tariffs between the countries and promote all aspects of international trade.
There are many brands of laundry detergent, all equally effective. Would you expect the elasticity of demand for any particular brand to be high or low? Explain.
The United Nation's Department of Economic and Social Affairs, Population Division, tracks the total number of foreign-born people by nation.
The market value of a bond will always approach its par value as its maturity date approaches, provided the bond's required return remains constant.
When General Motors devotes $1 billion to new investment (e.g., building new factories, warehouses, offices), who does the saving that is required? Stockholders? Workers? The public? Buyers of cars? It is estimated that the value of our private capit..
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