Question Find study &

Answer resources
Explanation Related Questions Related Textbooks Related Courses 숿

Question 숤 Answered step-by-step

Assume that there is uncertainty about the value of pollution...

Assume that there is uncertainty about the value of pollution control as a result of, for instance, uncertainty about the costs of pollution.
Draw two different "demand curves" (or benefit curves) for pollution (one "high" benefit and one "low" benefit), showing the marginal benefit
of reducing pollution by one more unit decreasing as the level of pollution reduction increases. Assume that the marginal cost of pollution
abatement increases as the level of pollution abatement increases.
a. Assume the government can regulate the amount of pollution control after it knows what the benefits are. Show what the level of
pollution control will be in each situation.

b. Assume the government can impose a tax on pollution after it knows what the benefits are. Show what the level of tax (or fine) will be in
each situation. Is there any difference between regulations and fines in these circumstances?

c. Now assume that the government must set the level of allowable pollution before it knows what the benefits are. How will it set the level
of allowable pollution? (Hint: there is a cost to society due to allocative inefficiency: from allowing too much pollution, if it turns out the
benefits of pollution reduction are high; from being too restrictive, if it turns out the benefits are low.) How do you minimize the sum of these
two social welfare loses?

d. Now assume the government must set the level of fine before it knows what the benefits are. How will it set the fine? Is there a difference
between fines and regulations here?

e. Now assume that marginal benefits of pollution abatement are unknown. Assume also that when marginal benefits are high, the marginal
costs are also high, and similarly, costs are low when benefits are low. Contrast a system of fines and regulations under these
circumstances, where the level of fine or regulation must be set before costs are known.

Business Economics 섈 쉋

Answer & Explanation Solved by verified expert 숨

The purpose of this paper is to analyze the economics of pollution where the economic production has tradeoffs on whether the high-
income or low-income countries defining whether they lie their economy on command-oriented or market-oriented.
 

Step-by-step explanation

a The level of pollution control will not be zero as there is an assumption to give zero pollution as an optimal. However, the optimal
level of pollution will not be zero as the optimal level based on the economic decision rule will be marginal benefit equaling marginal
cost (Zhao et al., 2019).

Image transcription text

섘 Positive Externalities Dead Weight Loss Supply - Marginal
Cost P - Marginal Social Benefit Positive Externality D -

Marginal Private Benefit Market Social Quantity Optimum

b The company producing negative externality will pay the marginal private costs and tax that will be equal to externality to achieve
the socially optimal level of output as it acts as paying damage caused by others
 

Image transcription text

 Pigouvian Tax 3, - Marginal Social Cost - MPC + Externality

Question Find study &

Answer resources
Explanation Related Questions 섘 P Negative
Related Externality - Pigouvian
Textbooks TaxCourses
Related S, - Marginal Private
숿
Cost Demand - Marginal Benefit Social Optimal... Show more

c. The allowable pollution will be most efficient for the business as it will be the point
where the business gets pollution abatement where the benefits exceed the costs. The

efficient level of pollution involves where the marginal benefit of any additional pollution

unit will be equal to marginal cost.

d. The government will set the fine once the business will be out of compliance as there are

limits set and the government monitors the behavior to see if they abide by the standards

(Garcia, Leal & Lee, 2018). The fines are set high to discourage the firms from being out

of compliance. If the fines are set are cheap there will be less incentive for firms to

comply.

e. The level of regulation or fine should be set based on where the government considers

both the MBs and MCs to consider the optimal level of pollution control. When MB is

greater than MC then pollution control will be increased to get net benefits (Foramitti,

Savin & van den Bergh, 2021). When MB is less than MC then the control should

decrease to avoid the net losses.

 
 
 
 
 
 
 
 
 
References;
 
Foramitti, J., Savin, I., & van den Bergh, J. C. (2021). Emission tax vs. permit trading under

bounded rationality and dynamic markets. Energy Policy, 148, 112009.

Garcia, A., Leal, M., & Lee, S. H. (2018). Time-inconsistent environmental policies with a

consumer-friendly firm: tradable permits versus emission tax. International Review of

Economics & Finance, 58, 523-537.

Zhao, X., Yao, J., Sun, C., & Pan, W. (2019). Impacts of carbon tax and tradable permits on

wind power investment in China. Renewable Energy, 135, 1386-1399.

Student reviews 싙 50% (2 ratings)

Is this answer helpful? Helpful 싙 Unhelpful 싗

Report this answer

Add to library

Business
/ Economics
/ Assume that there is uncertainty about the
Related Answered Questions
Find study resources 숿
Question Answer & Explanation Related Questions Related Textbooks Related Courses

숵 Q: Write a python program that does the following: Prompt for a file name of text words.  Words can be on many lines with m

숵 Q: 5.5.1 You are going to ask a user for a text file and then count the number of vowels and consonants in that file. Write

숵 Q: Why auctions are popular today compared to 10 or 20 years ago? How is pricing related to auctioning? What are auction me

숵 Q: 1.    Dr TTR, a single Australian resident, is a high profile researcher at Murdoch University earning a salary of $150,

숵 Q: Assume that all individuals have identical preferences but some individuals are wealthier than others. Assume there is a

See more 쇵

Can't find your question?

Ask a new question

숥 We have related textbook solutions for you!

Chapter 10, Exercise 4 Expert Verified

Principles of Economics Mankiw

View Textbook Solutions

Related Course Resources

AKUNTANSI 12 AKUNTANSI 123

University of Pembangunan … University of Pembangunan … U

섵 163 Documents 섵 156 Documents 섵

❓ 1 Question & Answer

솩 솩 솩 솩 솩 솩

Company Get Course Hero Careers

About Us iOS Leadership

Scholarships Android Careers
Sitemap Chrome Extension Campus Rep Program
Q&AQuestion
Archive
Find study &
Answer resources
Explanation Related Questions
Educators Related Textbooks Related Courses 숿
Standardized Tests Tutors
Education Summit

Help Legal Connect with Us

Contact Us Copyright Policy College Life

FAQ Academic Integrity Facebook
Feedback Our Honor Code Twitter
Privacy Policy LinkedIn
Terms of Use YouTube
Attributions Instagram

Copyright © 2022. Course Hero, Inc.

Course Hero is not sponsored or endorsed by any college or university.