9.25 Chapter 10

# 9.25 Chapter 10 - Econ 101 Introduction to Microeconomics...

• Notes
• 23

This preview shows pages 1–8. Sign up to view the full content.

Click to edit Master subtitle style Econ 101 Introduction to Microeconomics Professor Richard V. Burkhauser 10 Externalities

This preview has intentionally blurred sections. Sign up to view the full version.

Econ 101 – Professor Burkhauser Key Concepts Externality, p. 204 Internalizing an externality, p. 207 Coase theorem, p. 210 Transaction costs, p. 211 Pigovian tax, p. 213
Econ 101 – Professor Burkhauser Figure 10.1 Pollution and the Social Optimum Equilibri um Quantity of Aluminu m 0 Price of Aluminu m Dema nd (private value) Sup ply (private cost) Soc ial c o st Q OPTI MUM Optim um Cost of polluti on Q MA RKET Dema nd Ta x

This preview has intentionally blurred sections. Sign up to view the full version.

Econ 101 – Professor Burkhauser Question 10.1: Beneficiaries of a Pollution Tax The major beneficiaries of a tax on the output of sulfur dioxide in the production of plastic dolls are: a) consumers of dolls b) producers of dolls c) workers in doll factories d) those who value clean air
Econ 101 – Professor Burkhauser Question 10.2 Market for Pollution The table below gives the cost schedule for reducing sulfur dioxide emissions: Per Unit Cost of Eliminating Firms A B C D First unit \$100 \$200 \$500 \$800 Second unit \$200 \$400 \$550 \$1,000 Third unit \$300 \$600 \$700 \$2,000 Fourth unit \$600 \$700 \$900 \$4,000

This preview has intentionally blurred sections. Sign up to view the full version.

Econ 101 – Professor Burkhauser Question 10.2 (continued) If the federal government wanted to reduce pollution from 16 to 12 units, it should charge a pollution fee of: a. \$250 b. \$350 c. \$650 d. \$950 e. \$1,050
Econ 101 – Professor Burkhauser \$ 0 \$1,0 00 \$1,5 00 \$2,0 00 \$2,5 00 \$3,0 00 \$3,5 00 \$4,0 00 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 1 6 Figure 10.2 Market for Pollution MC to society of pollution MB to firm of polluting If firms do not bear the cost of the pollution they produce, they will generate 16 units of pollution. Is this optimal? No, because the marginal cost to society of the 16th unit of pollution is greater than its marginal benefit.

This preview has intentionally blurred sections. Sign up to view the full version.

This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern