According to the below article and graph: D. The price of cars would remain the

Question

According to the below article and graph:

D.  The price of cars would remain the same

Does the article provide sufficient information to conclude how the burden of the policy would be actually split between buyer and sellers if the policy were implemented?

a.Yes

b. No

D.  P2, Q2

H.  Supply would shift right and demand would shift left

Carbon laws ‘to drive top cars away’

FULL TEXT
The car industry has warned that some of Australia’s most popular cars will be taken off the market, or face
significant price hikes, under tough carbon-emissions standards being actively considered by the Turnbull
government.
The Federal Chamber of Automotive Industries said the Toyota Hilux and Ford Ranger, the ­nation’s top-selling cars
last year, would be among those at risk under proposed emissions rules, similar to those abandoned by US
President Donald Trump.
The Australian can reveal a 105gCO2/km emissions target, which only two of Australia’s top 20 cars come close to
meeting, remains a live option for the government, which plans to sell the policy as a win for motorists.
Cities Minister Paul Fletcher, who is leading the government’s Ministerial Forum on Vehicle Emissions with Energy
Minister Josh Frydenberg, said the government was yet to finalise the policy, but “any decision will place ­savings
for Australians front and centre”.
“Under a fuel efficiency standard, the average motorist in Australia could save up to $500 a year in fuel costs,” he
said.
The savings will be made by consumers only if they switch to newer, more economical vehicles.
Ford Ranger driver Callum Partridge, whose father and three brothers also own the oversized American-style utes,
said it would be “ridiculous” if the cars were taken off the market.
“If you look at other countries, they are everywhere. I don’t understand why Australia would have a problem,” Mr
Partridge said. “The price of cars is already above what people in other countries are paying ...You can get the
same car in America, but here you’re paying almost double.” The mooted ­saving is modelled on the 105gCO2/km
target, which motoring organisations have previously branded a ­“carbon tax on cars” that would add up to $5000
to the price of some vehicles.
Carmakers would be forced to meet the target as the average emission level of all vehicles they sell in Australia, or
face fines for breaching the limit.
To sell cars such as the Hilux and Ranger, which typically emit more than 260gCO2/km, manufacturers would have
to sell more electric vehicles and hybrids.
The Toyota Corolla, which is leading vehicle sales this year, emits 96gCO2/km in its hybrid electric form, while the
1.8-litre petrol version emits 159gCO2/km, the Green Vehicle Guide says.

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It’s understood energy bureaucrats are continuing to model the 105gCO2/km target under different EV uptake
scenarios to come up with a policy that will have no theoretical impact on prices and won’t force drivers to switch
cars.
The new standard was proposed for 2025, but could be ­deferred until 2027. FCAI chief executive Tony Weber said
manufacturers would be unable to meet the target while continuing to sell the cars Australians wanted to buy at
prices they were willing to pay.
“If such a scheme was put in place, manufacturers will either have to restrict the supply of vehicles with higher
CO2 outputs, or pay fines which ultimately will be borne by consumers,” he said.
“If you look at the UK market, the biggest selling car in recent years has been the Ford Fiesta.
“In Australia, the biggest selling cars in the past two years have been the Toyota Hilux and the Ford Ranger.”
Nationals senator John Williams said he would resist any new standard that affected the ability of rural and
regional Australians to buy their vehicle of choice.
“This might be all well and good to save the planet in someone’s eyes, but to me an electric vehicle out on a
station, on a farm, would be totally useless,” he said.
The Ministerial Forum on ­Vehicle Emissions has to come up with a policy to address carbon emissions in the
transport fleet, which must fall by 26-28 per cent of 2005 levels by 2030, under the government’s Paris Agreement
climate change commitments. It is yet to unveil its final proposal, ­despite working on the issue for more than 212
years.
Information released to stakeholders last year said the 105gCO2/km target “offers the highest net benefit and
highest practical contribution to the 2030 target”.
At the time, Mr Frydenberg said there was “as much chance of a carbon tax on cars as Elvis making a comeback”.
He has since predicted an electric vehicle “revolution” in Australia, saying there will be more that one million EVs
on Australian roads by 2030, up from the current 4000.
The International Energy Agency, in a report released yesterday, warned that motorists needed financial incentives
to switch to EVs.The US Environment Protection Authority announced last month that planned Obama-era car
emissions standards of about 100gCO2/km were “too stringent” and would punish ­consumers.

if the emissions target is put in effect: A.  Consumers have an incentive to buy more cars B.  Sellers have an incentive to supply more electric vehicles and hybrids C.  Sellers have an incentive to maintain their production of high emissions vehicle

D.  The price of cars would remain the same

What type of economic problem does the article discuss?

Does the article provide sufficient information to conclude how the burden of the policy would be actually split between buyer and sellers if the policy were implemented?

a.Yes

b. No

Suppose that instead of implementing the policy described in the article, the government introduces a per-unit tax of size P3-P1 on buyers. 8.1.   What is the equilibrium that is achieved by the market after the tax? A.  P3, Q1 B.  P4, Q2 C.  P3, Q3

D.  P2, Q2

Suppose that instead of implementing the policy described in the article, the government introduces a per-unit tax of size P3-P1 on buyers.    True or false: This alternative policy fully internalises the externality. Suppose the government implements the policy described in the article. What do you expect is most likely to happen in the market for electric and hybrid vehicles? A.  Only demand would shift to the right B.  Only demand would shift to the left C.  Only supply would shift to the right D.  Only supply would shift to the left E.  Both demand and supply would shift to the right F.  Both demand and supply would shift to the left G.  Demand would shift right and supply would shift left

H.  Supply would shift right and demand would shift left

Suppose the government implements the proposed policy. Some consumers may respond by choosing to live closer to public transport hubs. If so, this is an example of why: A.  The elasticity of demand is often lower in the long-run than the short-run B.  The elasticity of supply is often lower in the long-run than the short-run C.  The elasticity of demand is often higher in the long-run than the short-run D.  The elasticity of supply is often higher in the long-run than the short-run A.  Positive externality in production B.  Positive externality in consumption C.  Negative externality in production D.  Negative externality in consumption Price f high emissio-nS vehicdes 3 2 Social . Value emisSions Vehides

Explanation / Answer

1 B. They will be forced to sell electric and hybrid cars

2 negative externality in consumption

3 No

4 P3, Q1. Use initial demand curve to arrive at conclusions 5 false

6 Only supply will shift to left. Movement is on a demand curve towards left

7 A. They ultimately shift to alternatives

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