{" 1' IV. Regulation E Marginal Damage Aggregate Marginal Abatement Cost E2 E3 E4 Emissions Figure 3: Aggregate marginal abatement costs and marginal damage of emissions Suppose a tax is set at t' from Figure 3. How many units of emissions are ABATED and is abatement achieved cost effectively?

A country called Sherwood is very heavily covered with a forest of 50,000 trees. There are proposals to clear some of Sherwoods forest and grow com, but obtaining this additional economic output will have an environmental cost from reducing the number of trees. Table 12.11 shows possible combinations of economic output and environmental protection. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the number of trees, and the quantity of economic output, measured in corn, on the vertical axis. Which choices display productive efficiency? How can you tell? Which choices show allocative efficiency? How can you tell? In the choice between T and R, decide which one is better. Why? In the choice between T and S, can you say which one is better, and why? If you had to guess, which choice would you think is more likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice Q or S? Why?

What arguments d0 low-income countries make in international discussions of global environmental clean-up?

Classify the following pollution-control policies as command-and-control or market incentive based. A state emissions tax on the quantity of carbon emitted by each firm. The federal government requires domestic auto companies to improve car emissions by 2020. The EPA sets national standards for water quality. A city sells permits to films that allow them to emit a specified quantity of pollution. The federal government pays fishermen to preserve salmon.

As the extent of environmental protection expands, would you expect the marginal benefits of environmental protection to rise or fall? Why or why not?

Name two public goods and explain why they are public goods.

An emissions tax on a quantity of emissions from a film is not a command-and-control approach to reducing pollution. Why?

What is an externality?

What is a marketable permit and what incentive does it provide for a firm to account for external costs?

What advantages and disadvantages do you see in using acap-and-trade system to reduce greenhouse gas emissions?What pros and cons do you see in using carbon taxes toachieve this goal? What do you think of the idea of a revenueneutralcarbon tax? If you were a U.S. senator, what type ofpolicy would you support in order to address emissions in theUnited States, and why?