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Chapter 12: Q.17 (page 297)

In a market without environmental regulations, will the supply curve for a firm account for private costs, external costs, both, or neither? Explain.

Short Answer

Expert verified

In a market without environmental regulations, the supply curve for a firm account for only the private cost.

Step by step solution

01

Supply curve :

The supply curve is based on manufacturing decisions made by businesses while considering their marginal costs.

02

Explanation : 

If there were no environmental regulations, a firm's supply curve would consider private costs since it would be possible to spew pollution at zero cost.

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Most popular questions from this chapter

An emissions tax on a quantity of emissions from a firm is not a command-and-control approach to reducing pollution. Why?

Is zero pollution possible under a marketable permits system? Why or why not?

From an economist's perspective, is it sound policy

to pursue a goal of zero pollution? Why or why not?

Four firms called Elm, Maple, Oak, and Cherry, produce wooden chairs. However, they also produce a great deal of garbage (a mixture of glue, varnish, sandpaper, and wood scraps). The first row of Table 12.6shows the total amount of garbage (in tons) that each firm currently produces. The other rows of the table show the cost of reducing garbage produced by the first five tons, the second five tons, and so on. First, calculate the cost of requiring each firm to reduce the weight of its garbage by one-fourth. Now, imagine that the government issues marketable permits for the current level of garbage, but the permits will shrink the weight of allowable garbage for each firm by one-fourth.

What will be the result of this alternative approach to reducing pollution?


Elm
Maple
Oak
Cherry
Current production of garbage (in tons)
20406080
Cost of reducing garbage by first five tons
\(5,500
\)6,300
\(7,200
\)3,000
Cost of reducing garbage by second five tons
\(6,000
\)7,200
\(7,500
\)4,000
Cost of reducing garbage by third five tons
\(6,500
\)8,100
\(7,800
\)5,000
Cost of reducing garbage by third five tons
\(7,000
\)9,000
\(8,100
\)6,000
Cost of reducing garbage by fifth five tons
\(0
\)9,900
\(8,400
\)7,000

Consider two ways of protecting elephants from poachers in African countries. In one approach, the government sets up enormous national parks that have sufficient habitat for elephants to thrive and forbids all local people to enter the parks or to injure either the elephants or their habitat in any way. In a second approach, the government sets up the national parks and designates 10villages around the edges of the park as official tourist centers that become places where tourists can stay and bases for guided tours inside the national park. Consider the different incentives of local villagers - who often are very poor - in each of these plans. Which plan seems more likely to help the elephant population?
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