Various countries including Australia, Ireland, and the United States require th

Question

Various countries including Australia, Ireland, and the United States require that firms sell more fuel-efficient light bulbs (such as compact fluorescent bulbs) instead of incandescent light bulbs. These restrictions were designed to reduce carbon and global warming. What alternative approaches could be used to achieve the same goals? The optimal outcome for society could be achieved by A. setting a restriction for incandescent bulbs equal to the difference in the competitive market quantity and the socially optimum level. ( B. imposing a fine on incandescent bulbs equal to their social marginal costs at the optimum level. O C. setting a quota for incandescent bulbs equal to to the difference in their private and social marginal costs at the optimum level. O D. taxing incandescent bulbs by an amount equal to the difference in their private and social marginal costs at the optimum level. O E. subsidizing incandescent bulbs by an amount equal to the difference in their price and their private marginal cost at the optimum level. What are the advantages and disadvantages of a ban relative to the alternatives? The ban on incandescent light bulbs offers A. the disadvantage of reducing more pollution than necessary given the associated benefits O B. the advantage of completely reducing pollution associated with them. O C. the disadvantage of not knowing how much pollution will be reduced. D. the advantage of reducing pollution associated with fluorescent bulbs. 0 E. the advantage of increasing government revenue

Explanation / Answer

1. The optimal outcome for a society could be achieved by taxing incandescent bulbs by an amount equal to the difference in their private and social marginal costs at the optimum level. This will help the producers move towards more fuel efficient light bulbs.

2. The ban on incandescent light bulb offers the advantage of completely reducing pollution associated with them. The contribution towards global warming from this segment can be reduced completely by replacing them with environment friendly and efficient light bulbs.

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