Chapter 12: Q.32 (page 297)
Will a system of marketable permits work with thousands of firms? Why or why not?
Yes, the permits can work with thousand of firms.
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How can high-income countries benefit from
covering much of the cost of reducing pollution created
by low-income countries?
Identify whether the market supply curve will shift right or left or will stay the same for the following:
a. Firms in an industry are required to pay a fine for their carbon dioxide emissions.
b. Companies are sued for polluting the water in a river.
c. Power plants in a specific city are not required to address the impact of their air quality emissions.
d. Companies that use fracking to remove oil and gas from rock are required to clean up the damage.
Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. QS1 is the quantity supplied without social costs. QS2 is the quantity supplied with social costs. What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs, and then when we account for social costs. How does accounting for the externality affect the equilibrium price and quantity?
The rows in Table 12.7 show three market-oriented tools for reducing pollution. The columns of the table show three complaints about command-and-control regulation. Fill in the table by stating briefly how each market-oriented tool addresses each of the three concerns.
Incentives to Go Beyond | Flexibility about Where and How Pollution Will Be Reduced | Political Process Creates Loopholes and Exceptions | |
Pollution Charges | |||
Marketable Permits | |||
Property Rights |
What is the difference between private costs and social costs?
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