What is an effluent fee? Graphically, show how an effluent fee can correct an externality
What will be an ideal response?
An effluent fee is a charge to a polluter that gives the right to discharge into the air or water a certain amount of pollution. In the above figure, the market solution is point E, with price of P1 and output of Q1. The external cost of the pollution is equal to the distance FE, so an effluent fee equal to FE causes the firms to produce fewer units. The optimum is at E*, with price of P*, and output of Q*.
You might also like to view...
A local Krispy Kreme doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was:
a. elastic. b. inelastic. c. of unitary elasticity. d. indeterminate; more information is needed to determine the price elasticity of demand.
An import quota on a product protects domestic industries by:
a. reducing the foreign supply to the domestic market and, thereby, raising the domestic price. b. increasing the foreign supply to the domestic market and, thereby, lowering the domestic price. c. increasing the domestic demand for the product and, thereby, increasing its price. d. providing the incentive for domestic producers to improve the efficiency of their operation and, thereby, reduce their per-unit costs of production.
During the short-run period of the production process, a firm is: a. unable to vary any of its factors of production
b. able to vary only some of its factors of production. c. able to vary all of its factors of production. d. able to vary the size of its plant.
Major macroeconomic questions include all of the following EXCEPT:
A. What are the causes of unemployment? B. What causes economic growth? C. What causes differences in wages between men and women? D. Why does inflation vary over time and across countries?