Chapter 12: Q.7 (page 293)
An emissions tax on a quantity of emissions from a firm is not a command-and-control approach to reducing pollution. Why?
Emission taxes are market-based environmental measures that allow businesses to minimize certain types of emissions.
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Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant. What information or data would you obtain to measure the external [not social] cost?
Would environmentalists favor command-and-control policies as a way to reduce pollution? Why or why not?
What is command-and-control environmental regulation?
Consider the case of global environmental problems that spill across international borders as a prisoner’s dilemma of the sort studied in Monopolistic Competition and Oligopoly. Say that there are two countries, A and B. Each country can choose whether to protect the environment, at a cost of , or not to protect it, at a cost of zero. If one country decides to protect the environment, there is a benefit of , but the benefit is divided equally between the two countries. If both countries decide to protect the environment, there is a benefit of , which is divided equally between the two countries.
a. In Table , fill in the costs, benefits, and total payoffs to the countries of the following decisions. Explain why, without some international agreement, they are likely to end up with neither country acting to protect the environment.
Identify the following situations as an example of a negative or a positive externality:
a. You are a birder (bird watcher), and your neighbor has put up several birdhouses in the yard as well as planting trees and flowers that attract birds.
b. Your neighbor paints his house a hideous color.
c. Investments in private education raise your country’s standard of living.
d. Trash dumped upstream flows downstream right past your home.
e. Your roommate is a smoker, but you are a nonsmoker.
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