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Chapter 12: Q.32 (page 297)

Will a system of marketable permits work with thousands of firms? Why or why not?

Short Answer

Expert verified

Yes, the permits can work with thousand of firms.

Step by step solution

01

Introduction

Marketable permits are the programs under which stock certain permits allowing only a particular quantity of pollution. they will be bought and sold.

02

Explanation

It must start by determining the general pollution it can decrease in order that it can meet national standards. Then number of permits then divided among the firms who emit the pollutants. these permits is sold or given free. The condition attached with these sorts of permits that they are doing not emit the pollution beyond a selected limit this year and also the level will last reducing in next coming years. Thousands of firms can work along. Buying and selling of permits determine which firm is reducing pollution and by what proportion. people who have reduce the pollution won't buy the permits. These permits we also call as a shrinkable kind of permit where amount of pollution decline with time.

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Most popular questions from this chapter

In the tradeoff between economic output and environmental protection, what do the combinations on the protection possibility curve represent?

Four firms called Elm, Maple, Oak, and Cherry, produce wooden chairs. However, they also produce a great deal of garbage (a mixture of glue, varnish, sandpaper, and wood scraps). The first row of Table 12.6shows the total amount of garbage (in tons) that each firm currently produces. The other rows of the table show the cost of reducing garbage produced by the first five tons, the second five tons, and so on. First, calculate the cost of requiring each firm to reduce the weight of its garbage by one-fourth. Now, imagine that the government issues marketable permits for the current level of garbage, but the permits will shrink the weight of allowable garbage for each firm by one-fourth.

What will be the result of this alternative approach to reducing pollution?


Elm
Maple
Oak
Cherry
Current production of garbage (in tons)
20406080
Cost of reducing garbage by first five tons
\(5,500
\)6,300
\(7,200
\)3,000
Cost of reducing garbage by second five tons
\(6,000
\)7,200
\(7,500
\)4,000
Cost of reducing garbage by third five tons
\(6,500
\)8,100
\(7,800
\)5,000
Cost of reducing garbage by third five tons
\(7,000
\)9,000
\(8,100
\)6,000
Cost of reducing garbage by fifth five tons
\(0
\)9,900
\(8,400
\)7,000

As the extent of environmental protection expands, would you expect marginal costs of environmental protection to rise or fall? Why or why not?

What are the economic tradeoffs between low-income and high-income countries in international conferences on global environmental damage?

What is a marketable permit and what incentive does it provide for a firm to account for external costs?
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