Question : 71.RefertoFigure10-16.Thisgraphshowsthemarketforpollutionwhenpermitsareissuedtofirmsandtradedinthemarketplace.Theequilibriumpriceofpollutionis a.$50 b.$500 c.$1,000 : 1261397

 

71.RefertoFigure10-16.Thisgraphshowsthemarketforpollutionwhenpermitsareissuedtofirmsandtradedinthemarketplace.Theequilibriumpriceofpollutionis

a.$50

b.$500

c.$1,000

d.$2,000

72.RefertoFigure10-16.Thisgraphshowsthemarketforpollutionwhenpermitsareissuedtofirmsandtradedinthemarketplace.Theequilibriumnumberofpermitsis

a.50

b.100

c.1,000

d.2,000

73.RefertoFigure10-16.Thisgraphshowsthemarketforpollutionwhenpermitsareissuedtofirmsandtradedinthemarketplace.Intheabsenceofapollutionpermitsystem,thequantityofpollutionwouldbe

a.25

b.50

c.75

d.100

74.Twofirms,AandB,eachcurrentlyemit100tonsofchemicalsintotheair.Thegovernmenthasdecidedtoreducethe pollutionand fromnowon willrequirea pollutionpermitfor eachtonof pollutionemittedinto theair.Thegovernmentgiveseachfirm40pollutionpermits,whichitcaneitheruseorselltotheotherfirm.ItcostsFirmA$200foreachtonofpollutionthatiteliminatesbeforeitisemittedintotheair,anditcostsFirmB$100foreachtonofpollutionthatiteliminatesbeforeitisemittedintotheair.Afterthetwofirmsbuyorsellpollutionpermitsfromeachother,wewouldexpectthatFirmAwillemit

a.20 fewertonsof pollutioninto theair,and FirmBwill emit100fewer tonsofpollution intotheair.

b.100 fewertonsof pollutioninto theair,and FirmBwill emit20fewer tonsofpollution intotheair.

c.50 fewertons ofpollution intothe air,and FirmBwill emit50 fewertons ofpollution intotheair.

d.20more tonsof pollution intothe air,and Firm Bwill emit 100fewer tonsof pollution intothe air.

75.Twofirms,AandB,eachcurrentlyemit100tonsofchemicalsintotheair.Thegovernmenthasdecidedtoreducethe pollutionand fromnowon willrequirea pollutionpermitfor eachtonof pollutionemittedinto theair.Thegovernmentgiveseachfirm40pollutionpermits,whichitcaneitheruseorselltotheotherfirm.ItcostsFirmA$200foreachtonofpollutionthatiteliminatesbeforeitisemittedintotheair,anditcostsFirmB$100foreachtonof pollutionthatiteliminates beforeitisemittedinto theair.Itis likelythat

a.FirmAwillbuyallofFirmB’spollutionpermits.Eachonewillcostbetween$100and$200.

b.FirmBwillbuyallofFirmA’spollutionpermits.Eachonewillcostbetween$100and$200.

c.Bothfirmswillusetheirownpollutionpermits.

d.FirmAwillbuysomeofFirmB’spollutionpermits.Eachonewillcostlessthan$100.

76.Twofirms,AandB,eachcurrentlydump50tonsofchemicalsintothelocalriver.Thegovernmenthasdecidedtoreducethepollutionandfromnowonwillrequireapollutionpermitforeachtonofpollutiondumpedintotheriver.ItcostsFirmA$100foreachtonofpollutionthatiteliminatesbeforeitreachestheriver,anditcostsFirmB$50foreachtonofpollutionthatiteliminatesbeforeitreachestheriver.Thegovernmentgiveseachfirm20pollutionpermits.Governmentofficialsarenotsurewhethertoallowthefirmstobuyorsellthepollutionpermitstoeachother.Whatisthetotalcostofreducingpollutioniffirmsarenotallowedto buyand sellpollutionpermits fromeachother?Whatisthetotalcostofreducingpollutionifthefirmsareallowedtobuyandsellpermitsfromeachother?

a.$3,000;$1,500

b.$4,500;$3,500

c.$4,500;$4,000

d.$4,500;$2,500

77.Twofirms,AandB,eachcurrentlydump20tonsofchemicalsintothelocalriver.Thegovernmenthasdecidedtoreducethepollutionandfromnowonwillrequireapollutionpermitforeachtonofpollutiondumpedintotheriver.Thegovernmentgiveseachfirm10pollutionpermits,whichitcaneitheruseorselltotheotherfirm.ItcostsFirmA$100foreachtonofpollutionthatiteliminatesbeforeitreachestheriver,anditcostsFirmB$50foreachtonofpollutionthatiteliminatesbeforeitreachestheriver.Afterthetwofirmsbuyorsellpollutionpermitsfromeachother,wewouldexpectthat

a.FirmAwillnolongerpollute,andFirmBwillnotreduceitspollutionatall.

b.FirmBwillnolongerpollute,andFirmAwillnotreduceitspollutionatall.

c.FirmAwilldump10tonsofpollutionintotheriver,andFirmBwilldump10tonsofpollutionintotheriver.

d.Firm A will increase itspollution and Firm B willreduce its pollution.

78.Twofirms,AandB,eachcurrentlydump50tonsofchemicalsintothelocalriver.Thegovernmenthasdecidedtoreducethepollutionandfromnowonwillrequireapollutionpermitforeachtonofpollutiondumpedintotheriver.Thegovernmentwillsell40pollutionpermitsfor$75each.ItcostsFirmA$100foreachtonofpollutionthatiteliminatesbeforeitreachestheriver,anditcostsFirmB$50foreachtonofpollutionthatiteliminatesbeforeitreachestheriver.Neitherfirmproducesanylessoutput,buttheybothconformtothelaw.Itislikelythatbetweenthecostofpermitsandthecostofadditionalpollutionabatement,

a.Firm B willspend $3,500.

b.Firm Awill spend$4,000.

c.Firm Awill spend$4,500.

d.Firm B willspend $3,000.

79.Whichofthefollowingrequirefirmstopaytopollute?

a.(i)only

b.both(i)and(ii)

c.(iii)only

d.both(ii)and(iii)

Figure10-17

 

80.RefertoFigure10-17.Howlargewouldacorrectivetaxneedtobetomovethismarketfromtheequilibriumoutcometothesocially-optimaloutcome?

a.AnamountequaltoP’minusP.

b.AnamountequaltoP’.

c.AnamountequaltoP.

d.Anamountequaltotheexternalcost.

Table10-5

 

Thefollowingtableshowsthemarginalcostsforeachoffourfirms(A,B,C,andD)toeliminateunitsofpollutionfromtheirproductionprocesses.Forexample,forFirmAtoeliminateoneunitofpollution,itwouldcost$54,andfor Firm Ato eliminatea secondunit ofpollution itwould costan additional$67.

 

Firm

Unittobeeliminated

A

B

C

D

Firstunit

54

57

54

62

Secondunit

67

68

66

73

Thirdunit

82

86

82

91

Fourthunit

107

108

107

111

 

 

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