Economics: Principles, Problems, & Policies (McGraw-Hill Series in Economics) - Standalone book
20th Edition
ISBN: 9780078021756
Author: McConnell, Campbell R.; Brue, Stanley L.; Flynn Dr., Sean Masaki
Publisher: McGraw-Hill Education
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Chapter 4, Problem 7RQ
To determine
True or false.
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Assume citizens of Destrahan are complaining that Shell Chemical and Dow Chemical are polluting the environment. Currently, each firm emits 40 tons of pollution per year. Shell Chemical could reduce its pollution at a cost of $500 per ton, and Dow Chemical could reduce its pollution at a cost of $100 per ton. To reduce overall pollution to 40 units, the mayor gives each firm 20 tradable pollution permits. Each permit allows a firm to emit one ton of pollution. Assuming each permit has a market value is $200, what is the cost of reducing pollution to the desired level?
a.$2,000
b.$4,000
c.$8,000
d.$10,000
Suppose the United States has two utilities, Commonweath Utilities and Consolidated Electric. Both produce 20 million tons of sulfur dioxide pollution per year. However, the marginal cost of
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sulfur dioxide pollution in half (by 20 million tons per year).
If the government issues 10 million tradable pollution permits to each utility, what will be the cost of eliminating half of the pollution to society?
million per year.
Using a cap-and-trade system of tradable emission allowances will eliminate half of the sulfur dioxide pollution at a cost of $
Deborah and Janet are considering contributing toward the creation of a building mural. Each can choose whether to contribute $200 to the building
mural or to keep that $200 for a new sult.
Since a bullding mural is a public good, both Deborah and Janet will benefit from any contributions made by the other person. Specifically, every dollar
that either one of them contributes will bring each of them $0.80 of benefit. For example, if both Deborah and Janet choose to contribute, then a total
of $400 would be contributed to the building mural. So, Deborah and Janet would each receive $320 of benefit from the building mural, and their
combined benefit would be $640. This is shown in the upper left cell of the first table.
Since a new suit is a private good, if Deborah chooses to spend $200 on a new suit, Deborah would get $200 of benefit from the new suit and Janet
wouldn't recelve any benefit from Deborah's choice. If Deborah still spends $200 on a new suit and Janet chooses to contribute…
Chapter 4 Solutions
Economics: Principles, Problems, & Policies (McGraw-Hill Series in Economics) - Standalone book
Ch. 4.A - Prob. 1ADQCh. 4.A - Prob. 2ADQCh. 4.A - Prob. 3ADQCh. 4.A - Prob. 1ARQCh. 4.A - Prob. 2ARQCh. 4.A - Prob. 3ARQCh. 4.A - Prob. 1APCh. 4 - Prob. 1DQCh. 4 - Prob. 2DQCh. 4 - Prob. 3DQ
Ch. 4 - Prob. 4DQCh. 4 - Prob. 5DQCh. 4 - Prob. 6DQCh. 4 - Prob. 7DQCh. 4 - Prob. 8DQCh. 4 - Prob. 9DQCh. 4 - Prob. 1RQCh. 4 - Prob. 2RQCh. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - Prob. 5RQCh. 4 - Prob. 6RQCh. 4 - Prob. 7RQCh. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 3PCh. 4 - Prob. 4PCh. 4 - Prob. 5PCh. 4 - Prob. 6PCh. 4 - Prob. 7P
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