1. True or False g. Pollution arising from private automobile usage may be alleviated by a carbon tax on gasoline. h. Private provision of water and sewer service would result in a level of provision of service below the socially optimal level. i. Average cost pricing would result in an optimal level of provision of local services such as water and sewer.
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- 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.2. Efficiency in the presence of externalities Vaping imposes many external costs on society secondhand smoke, the adverse health burdens imposed on society, and so on. Therefore, the market equilibrium quiantity of vapes does not equal the socially optimal quantity. The following graph plots the demand for vapes (their private value), the supply of vapes (the private cost of producing them), and the social cost of vapes, including both the private cost and external costs. Use the block point (plus symbol) to indicate the market equilibrium quaneity Next, use the purple point (diamond symbol) to indicate the socially opamal quantity ? PRICE OF VAPES Demand (Private Value) QUANTITY OF VAPES Social Cost Supply (Private Cost) + Market Equilibrium Socially Optimal Level6. Where there are positive externalities from having a particular product in a society, the government can make the quantity of the product approach the socially optimal level by doing the following except Multiple Choice a. taxing the sellers of the product. b. subsidizing the sellers of the product. c. subsidizing the buyers of the product. d. providing the product itself. Choose the correct answer
- Price $240 $220 $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 0 S-MCMC Quantity of pediatrician visits Dudy-110 D$30 M Tools OWL OWL © a. Assume that the correct level of subsidy is $60. The socially optimal level of pediatrician visits is: 350 visits b. Compared to the efficient outcome, graph the deadweight loss that would result from subsidies of $30 or $90. Instructions: Use the tools provided "DWL 30' and 'DWLgo' to illustrate the deadweight loss for each subsidy. Drag the points to move or resize.D. Consider a ten-mile expressway. During rush-hour the equilibrium traffic is 2000 cars. The average private cost of the trip is $5 at the equilibrium traffic level. The marginal social cost of the trip is $9 at the equilibrium traffic level. The efficient traffic level is 1500 cars. The average private cost of the trip is $4 at the efficient traffic level. The marginal social cost of the trip is $7 at the efficient traffic level. a. Which traffic volume has a higher average trip speed? Why? 3 b. What is the externality cost per car at the equilibrium traffic level? What is the externality cost per car at the efficient traffic level? Explain. c. What is the level of the deadweight loss on this highway when it is in equilibrium? d. What is the efficient congestion toll on this highway? e. If the average fixed cost for expanding the highway is $2, should the state expand the highway? Explain.MAC of reducing SO2 emission Tons of SO2 Firm 1 Firm 2 Firm 3 1st 3 2 2nd 12 6 4 Зrd 18 9 6. 4th 24 12 8 5th 30 15 10 6th 36 18 12 The table shows the marginal abatement costs of reducing SO2 pollution. Each firm is emitting 6 tons of SO2 into the air currently. QUESTION 3 Suppose the government doesn't know each firm's costs of abatement. The socially efficient or least cost of reducing the pollution from 18 tons to 6 tons can be brought about by a per-unit SO2 tax of O 13 O 4 O 7 8
- Assume that the market for tradable emissions permits by power plants has been operating efficiently for severalyears. An engineering firmthen invents a lower cost device for pollution abatement. What happens to theequilibrium market price of a tradable permit, and why? Draw a supply and demand diagram, with a fixedsupply of pollution permits, along with your answer.Has the socially optimal amount of pollution increasedor decreased? Explainthe socially optimal price? place the line segment labled pollution limit In accordance with the 1990 Clean Air Act, the hypothetical state of South Smog imposes a pollution limit on the market for steel manufacturing shown on the graph below. Place the line segment labeled "Pollution limit" at the optimal pollution limit. Price and cost ($ per ton) 10 A Pollution limit B 9 Marginal social cost 8 7 4 2 1 0 о D Marginal cost Demand = marginal benefit 2 4 6 8 10 12 14 16. 18 20 Quantity in thousands of tons2. Efficiency in the presence of externalities Trucks impose many external costs on society: heavy air and noise pollution, traffic safety issues and road congestion, and so on. Therefore, the market equilibrium quantity of diesel trucks does not equal the socially optimal quantity. The following graph plots the demand for diesel trucks (their private value), the supply of diesel trucks (the private cost of producing them), and the social cost of diesel trucks, including both the private cost and external costs. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity. PRICE OF DIESEL TRUCKS Social Cost Supply (Private Cost) Demand (Private Value) QUANTITY OF DIESEL TRUCKS + Market Equilibrium ■ Socially Optimal Level ?
- This graph represents the tobacco industry. IPrice 16 14 Social Cost 12 10 Private Cost 8 6 4 Demand 200 500 650 Quantity a) Without any government intervention, what is the market determined price and quantity? b) What is the price of the externality? c) What is the socially optimal price and quantity? d) What should the government do (impose a tax or provide a subsidy) to internalize this externality? What is the amount of the the corrective tax/subsidy needed to be to move the outcome from the market equilibrium to the socially-optimal outcome?2. Efficiency in the presence of externalities Public wifi hotspots grant many external benefits on society: more equitable access to the Internet, increased educational opportunities, and so on. Therefore, the market equilibrium quantity of public wifi hotspots does not equal the socially optimal quantity. The following graph plots the demand for public win hotspots (their private value), the supply of public with hotspots (the private cost of producing them), and the social value of public wif hotspots, including both the private value and external benefits. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity. PRICE OF PUBLIC WIFI HOTSPOTS Supply (Private Cost) Social Value Demand (Private Value) QUANTITY OF PUBLIC WIFI HOTSPOTS + Market Equilibrum . Socially Optimal LevelTrue or false and use a graph to explain: the socially optimal level of pollution is zero.