Show or explain the externality argument for government regulation of the environment. Describe a policy the government could adopt that would reduce pollution, but not require estimation of the optimal pollution tax
Private market solutions will fail to consider external costs of production, such as pollution. Therefore, the
market will produce more than is socially optimal. A pollution rights system only requires the government
to establish a maximum quantity of pollution rights, and bidding for these rights among polluters will yield
an efficient allocation of these rights.
You might also like to view...
In the above table, what is the average variable cost to produce 4 units of output?
Refer to Figure 13-2. Ceteris paribus, an increase in the labor force would be represented by a movement from
A) SRAS1 to SRAS2. B) SRAS2 to SRAS1. C) point A to point B. D) point B to point A.
The larger the marginal propensity to consume,
a. the larger the multiplier. b. the larger the marginal propensity to save. c. the higher the income level of the economy. d. the smaller the change in income derived from a given change in government spending.
Which of the following is not an aspect of Keynesian economics?
A) Wages and prices tend to be inflexible downward. B) Supply does not necessarily generate its own demand. C) The interest rate is important in determining the level of investment, but not as important as other variables. D) Unemployment above natural unemployment is always a brief and temporary phenomenon.