Micro economics help

Posted on 2013-11-21 16:42:00 in Economics by ANNA

Assume the price of a tradable emissions permit for a ton of sulfur dioxide is $150. Which of the following is incorrect?



a) A firm that buys permits has an incentive to limit pollution up to the point at which the marginal benefit of emissions is equal to $150.

b) The opportunity cost of emitting a ton of sulfur dioxide is $75 for all firms.

c) A firm that has more permits than it plans to use has an incentive to limit pollution up to the point at which the marginal benefit of emissions is equal to $150.

d) The opportunity cost of emitting a ton of sulfur dioxide is $150 for all firms.



Suppose government officials have set an emissions tax to reduce pollution. Assume the optimal tax would be $1,500, but government officials have set the tax equal to $500. Then we can conclude that at equilibrium:



a) the marginal social benefit of pollution will be less than $500.

b) there will be too much pollution.

c) the marginal social benefit of pollution will be more than $500.

d) the marginal social cost of pollution will be less than $500.



If the marginal benefit received from pollution is equal to its marginal cost, then:



a) society's well-being can be improved if the quantity of pollution decreases.

b) the market is producing too much pollution.

c) society has achieved its socially optimal level of pollution.

d) society's well-being can be improved if the quantity of pollution increases.



The marginal social cost of a unit of pollution:



a) remains constant as more of a good is produced.

b) is easy to calculate since pollution produces costs.

c) is equal to the sum of the highest willingness to pay among all members of society to avoid that unit of pollution.

d) is often overestimated.



When tradable emissions permits are used, if the demand for emissions shifts to the right, the equilibrium price of permits ________, and the equilibrium quantity ________.



a) increases; stays the same

b) falls; falls

c) stays the same; increases

d) falls; increases

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