REVIEW QUESTIONS
- Table 11.5 provides the supply and demand conditions for a manufacturing firm. The third column represents a supply curve without accounting for the social cost of pollution. The fourth column represents the supply curve when the firm is required to account for the social cost of pollution. Identify the equilibrium before the social cost of production is included and after the social cost of production is included.
|
Price |
Quantity Demanded |
Quantity Supplied without paying the cost of the pollution |
Quantity Supplied after paying the cost of the pollution |
|
$10 |
450 |
400 |
250 |
|
$15 |
440 |
440 |
290 |
|
$20 |
430 |
480 |
330 |
|
$25 |
420 |
520 |
370 |
|
$30 |
410 |
560 |
410 |
- Consider two approaches to reducing emissions of CO2 into the environment from manufacturing industries in the United States. In the first approach, the U.S. government makes it a policy to use only predetermined technologies. In the second approach, the U.S. government determines which technologies are cleaner and subsidizes their use. Of the two approaches, which is the command-and-control policy?
- An emissions tax on a quantity of emissions from a firm is not a command-and-control approach to reducing pollution. Why?
- 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 11.6 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. Second, 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 fourth 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 |
- The rows in Table 11.7 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 Permi