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Chapter 12: Q.7 (page 293)
An emissions tax on a quantity of emissions from a firm is not a command-and-control approach to reducing pollution. Why?
Emission taxes are market-based environmental measures that allow businesses to minimize certain types of emissions.
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Would environmentalists favor command-and-control policies as a way to reduce pollution? Why or why not?
Consider two ways of protecting elephants from poachers in African countries. In one approach, the government sets up enormous national parks that have sufficient habitat for elephants to thrive and forbids all local people to enter the parks or to injure either the elephants or their habitat in any way. In a second approach, the government sets up the national parks and designates villages around the edges of the park as official tourist centers that become places where tourists can stay and bases for guided tours inside the national park. Consider the different incentives of local villagers - who often are very poor - in each of these plans. Which plan seems more likely to help the elephant population?
Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant. What information or data would you obtain to measure the external [not social] cost?
What are better-defined property rights and what incentive do they provide to account for external costs?
Show the market for cigarettes in equilibrium,
assuming that there are no laws banning smoking in
public. Label the equilibrium private market price and
quantity as Pm and Qm. Add whatever is needed to the
model to show the impact of the negative externality
from second-hand smoking. (Hint: In this case it is the
consumers, not the sellers, who are creating the negative
externality.) Label the social optimal output and price as
Pe and Qe. On the graph, shade in the deadweight loss at
the market output.
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