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HW 4 key answers - pollution because they can reduce pollution at a lower cost to society A tax can be set to reduce pollution to the same level as

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HW 4 Econ 13/IS 13 Due in class on Monday, Nov 29 th (Total 50 points) 1. In addition to investment in physical and human capital, what other public policies might a country adopt to increase productivity? (15 points) ANS: In addition to investment in physical and human capital, a country might increase productivity by (a) specifying and enforcing property rights, (b) encouraging free trade, (c) controlling population growth, and (d) promoting research and development. 2. What are corrective taxes? Why do economists prefer them to regulations as a way to protect the environment from pollution? (20 points) ANS: Corrective taxes are taxes enacted to correct the effects of a negative externality. Economists prefer corrective taxes over regulations as a way to protect the environment from
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Unformatted text preview: pollution because they can reduce pollution at a lower cost to society. A tax can be set to reduce pollution to the same level as a regulation. The tax has the advantage of letting the market determine the least expensive way to reduce pollution. The tax gives firms incentives to develop cleaner technologies to reduce the taxes they have to pay. 3. List some of the ways that the problems caused by externalities can be solved without government intervention. (15 points) ANS: Externalities can be solved without government intervention through moral codes and social sanctions, charities, merging firms whose externalities affect each other, or by contract....
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This note was uploaded on 01/17/2012 for the course ECON 13 taught by Professor Freed during the Fall '08 term at UC Irvine.

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