An automobile that you own could be considered a rival good, while flood control might be a good example of a non-rival good. Select one: O True O False
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- Suppose a city releases 16 million gallons of raw sewage into a nearby lake. Table 12.8 shows the total costs of cleaning up the sewage to different levels, together with the total benefits of doing so. (Benefits include environmental, recreational, health, and industrial benefits.) Using the information in Table 12.8, calculate the marginal costs and marginal benefits of reducing sewage emissions for this city. See Production, Costs and Industry Structure if you need a refresher on how to calculate marginal costs. What is the optimal level of sewage for this city? Why not just pass a law that films can emit zero sewage? After all, the total benefits of zero emissions exceed the total costs.Consider the case of global environmental problems that spill across international borders as a prisoners dilemma of the sort studied in Monopolistic Competition and Oligopoly. Say that there are two countries, A and B. Each country can cheese whether to protect the environment, at a cost of 10, or not to protect it, at a cost of zero. If one country decides to protect the environment, there is a benefit of 16, but the benefit is divided equally between the two countries. If both countries decide to protect the environment, there is a benefit of 32, which is divided equally between the two centuries. In Table 12.10, fill in the costs, benefits, and total payoffs to the countries of the following decisions. Explain why, without some international agreement, they are likely to end up with neither country acting to protect the environment.What is the free rider problem?
- What arguments d0 low-income countries make in international discussions of global environmental clean-up?What is an externality?Refer to Table 12.2. The externality created by the refrigerator production was 100. However, once we accounted for both the private and additional external costs, the market price increased by only 50. If the external costs were 100 why did the price only increase by 50 when we accounted for all costs?
- Computer models of global climate changecaused by increasing carbon dioxide in the atmosphere predictnot only higher overall temperatures, but also more intense andfrequent heat waves. During the devastating European heatwave in the summer of 2003, between 35,000 and 52,000“excess deaths” occurred. Before taking specific actions toreduce carbon dioxide emissions, economists and politicians tryto estimate the costs. Should excess deaths be included as acost of inaction? If so, what value should we place on a life?2. onlyd Question 11 1. A town needs to build a new flood mitigation barrier. The town engineer has selected two barrier designs for consideration. The first design is earthen barrier and the second design is concrete barrier. Use equivalent uniform annual cost (EUAC) analysis to determine which plan is. more economical. Assume a 25-year analysis period, an interest rate of 5%, and no salvage value. Earthen Barrier Annual maintenance cost Concrete Barrier Construction cost $9,000,000 $22,000,000 $1,200,000 $500,000 In the box below provide the EUAC of the concrete barrier
- cap-and-trade and windfall profitsA city called Seoul is suffering from high concentrations of mercury in the air, caused by burningcoal in power plants. There are two of these plants close to the city. The city’s mayor wants touse cap-and-trade to reduce emissions to a reportedly “safe” level of 60 tons. The two firms havethe following marginal benefits of emissions: MB1 = 100 – 2e1, MB2 = 25 – 0.5e2.a. How much mercury will each firm emit? What allowance price will prevail in themarket?Firm 2 hires a smart lobbyist who convinces the government that its profits are relatively low andthat it therefore deserves a generous allowance allocation. The government agrees and allocatesa1 = 20 allowances to firm 1 (for free) and a2 = 40 allowances to firm 2 (for free).b. What are the firms’ profits? Do any of the firms earn windfall profits? [Hint: compareprofits with and without regulation.] Windfall profits have been sharply criticized by consumer advocacy groups and politicians.c. What can…Determine the type of market failure represented by the scenario below. Buying a used appliance on Ebay Select one: O a. negative externality Ob. public good Oc positive externality O d. tragedy of the commons e. asymmetric informationFirm 11 2 Initial Pollution Level 3 100 200 $20 $40 Above is tabulated the pollution level in tons for three different manufacturing firms, as well as their cost per ton of reducing pollution. The government has decided to limit total pollution to 300 tons, and distribute to each firm 100 permits, each allowing the firm to emit 1 ton of the pollutant. By how much would the total cost of the pollution reduction initiative be reduced if the firms are allowed to trade their permits, as opposed to not letting them trade them? Cost of Reducing Pollution by 1 Unit $10 300
