externality of paper production, Suppose the u.S. gmerates a cost to soxiety tha
ID: 1111535 • Letter: E
Question
externality of paper production, Suppose the u.S. gmerates a cost to soxiety that is not paid for by the firmg therefore, pollution is a negative can charge ferms for pollution rights (the right to emit a given quantity of chemicals). The following gregh shows the wants to correct this market falure by gettig frms to internakze the daily demand for pollution rights. of polution. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to thies grapl Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field wil change accordingy Graph Input Tool Daily Demand for Pollution Rights (Delars per ton) 42 270 0 30 60 ” t20 150 100 210 240 270 300 QUANTTYMitions of tons)
Explanation / Answer
Answer:- Suppose the government has determined that the socially optimal quantity of chemical pollution is 150 120 million tons per day.
One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. A tax (or price in this case) of ……per ton of chemicals emitted will achieve the desired level of pollution.
The correct Answer:- $42
Reason:- When the price of emitting a ton of chemicals is $42, paper factories will demand a quantity of 120 million tons of chemicals. You can see this change by entering $42 in the Price field of the graph input tool.Therefore, if the U.S. government wants to reduce chemical pollution to 120 million tons per day, it should impose a tax of $42 per ton.
Answer:- The correct answer is $42
Reason:- Explanation:
It turns out that the government can achieve the same level of pollution using either tradable pollution permits or a tax. In both cases, emitting one ton of chemicals will cost a firm $42.
Selling 120 million pollution permits that each allow a firm to emit one ton of chemicals means that the supply of pollution will be 120 million tons per day. At a quantity of 120 million tons, the market for pollution rights will clear at a price of $42. That is, each pollution permit will have a value of $42 because, at this price, all 120 million pollution permits will be demanded.
Answer:- If this is all the information the government has, which solution to reduce pollution is appropriate? Check all that apply
Correct option:- Tradable permits and Corrective taxes
Reason:- Explanation:
Although, under some circumstances, corrective taxes and tradable permits can be equally effective at reducing pollution, the government may prefer one over the other due to the information it has.
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