Suppose the U.S. government wants to reduce sulfur dioxide emissions to correct

Question

Suppose the U.S. government wants to reduce sulfur dioxide emissions to correct this market failure. The government has determined that the efficient quantity of sulfur dioxide emissions is 140 million tons per day The following calculator shows the daily demand for pollution rights (the right to emit sulfur dioxide) in the United States. Use the calculator to help you answer the following questions. You will not be graded on anything you enter into the calculator Tool tip: Use your mouse to drag the green line on the graph. The values in the boxes on the right side of the calculator will change accordingly. You can also directly change the value in the box with the white background by clicking in the box and typing. The graph and any related values will change accordingly PRICE (Dollars per tonl POLLUTION CALCULATOR 100 90 80 70 60 50 40 30 20 10 Price [Dollars per tonl 18 Quantity Demanded [Millions of tons per day 180 25 50 75 100 125 150 175 200 Reset to Initial ValuesCalculate QUANTITY (Millions of tons per day] To reduce the amount of sulfur dioxide emitted by power stations, the U.S. government imposes a tax on sulfur dioxide emissions. A tax of million tons of sulfur dioxide per day) per ton of sulfur dioxide emitted will achieve the desired level of pollution (140 Suppose that instead of imposing a tax, the U.S. government decides to auction off tradable pollution permits to U.S power stations. Each permit entitles its owner to emit one ton of sulfur dioxide per day. In order to achieve a pollution level of 140 million tons per day (the efficient quantity of pollution), the government auctions off 140 million pollution permits. Given this quantity of permits, the price for each permit in the market for pollution rights will be $90 $0 $42 $50 $34 004-2016 Aplia. All rights reserved 5 © 2002-2013 Aplia.-All rights reserved. Grade It Now Save & Continue ngage Learning except as noted. All rights reserved

Explanation / Answer

To reduce the amount of sulphur dioxide emitted by power stations, th U.S government imposes a tax on sulphur dioxide emissions. a tax of around $34  per ton of sulphur dioxide emitted will achieve the desired level of pollution.If the government imposes a tax of less than this ,then power stations would choose to emit more than 140 million tons of sulphur dioxide.. And if imposes a tax more than this than sulphur dioxide is reduced by more than socially optimal level.

suppose that instead of imposing a tax, the U.s government decides to auction -off tradeable pollution permits to U.S power stations . each permit entitles its owner to emit one ton of sulphur dioxide per day. In order to achieve a pollution level of 140 million tons per day , the government auctions off 140 million pollution permits. Given this quantity of permits, the price of each permit in the market for pollution rights will be $34. Because it turns out that the government can achieve the same level of pollution using either tradeable pollution permits or a tax . In bith cases emitting one ton of sulphur dioxide will cost a firm $34 .

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.