Would the proposed legislation achieve production efficiency

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Reference no: EM131102739

A bill was recently introduced in the US Congress to limit greenhouse gas emissions from electricity generation and require electricity producers to generate a minimum percentage of power using renewable fuels, with some emission rights to be auctioned. The Congressional Budget Office estimated that the government would receive $846 billion from auctions and would spend $821 billion on incentive programs and compensation for higher energy prices. Electricity producers would spend $208 million a year to comply with the new rules.

a) Would the proposed legislation achieve production efficiency? Why or Why not.

b) Is the $846 billion that electricity producers would pay for the right to emit greenhouse gasses part of the opportunity cost of producing electricity? Why or Why not.

c) Is the $821 billion that the government would spend on incentive programs and compensation for higher energy prices part of the opportunity cost of producing electricity? Why or Why not.

d) Is the $208 million that electricity producers will spend to comply with the new rules part of the opportunity cost of producing electricity? Why or Why not.

Reference no: EM131102739

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