Chapter 12: Q.34 (page 297)
Is zero pollution an optimal goal? Why or why not?
Aiming for zero pollution should be the ultimate goal.
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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?
What are the three problems that economists have noted with regard to command-and-control regulation?
A country called Sherwood is very heavily covered with a forest of 50,000 trees. There are proposals
to clear some of Sherwood’s forest and grow corn, but obtaining this additional economic output will have an environmental cost from reducing the number of trees. Table 12.11 shows possible combinations of economic output and environmental protection.
a. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the number of trees, and the quantity of economic output, measured in corn, on the vertical axis.
b. Which choices display productive efficiency? How can you tell?
c. Which choices show allocative efficiency? How can you tell?
d. In the choice between T and R, decide which one is better. Why?
e. In the choice between T and S, can you say which one is better, and why?
f. If you had to guess, which choice would you think is more likely to represent a command-and-control
environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice Q or S? Why?
Would environmentalists favor command-and-control policies as a way to reduce pollution? Why or why not?
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 shows 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) | 20 | 40 | 60 | 80 |
| 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 |
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