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Chapter 12: Q.35 (page 297)
From an economist's perspective, is it sound policy
to pursue a goal of zero pollution? Why or why not?
Achieving zero pollution is the most equitable for the world, however, it isn't asensible aim.
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The state of Colorado requires oil and gas companies who use fracking techniques to return the land to its original condition after the oil and gas extractions. Table shows the total cost and total benefits (in dollars) of this policy.
Table
| Land Restored (in acres) | Total Cost | Total Benefit |
| 0 | \(0 | \)0 |
| 100 | \(20 | \)140 |
| 200 | \(80 | \)240 |
| 300 | \(160 | \)320 |
| 400 | \(280 | \)380 |
(a) Calculate the marginal cost and the marginal benefit at each quantity (acre) of land restored. See Production, Costs and Industry Structure if you need a refresher on how to calculate marginal costs and benefits.
b. If we apply marginal analysis, what is the optimal amount of land to be restored?
Classify the following pollution-control policies as command-and-control or market incentive-based.
a. A state emissions tax on the quantity of carbon emitted by each firm.
b. The federal government requires domestic auto companies to improve car emissions by 2020.
c. The EPA sets national standards for water quality.
d. A city sells permits to firms that allow them to emit a specified quantity of pollution.
e. The federal government pays fishermen to preserve salmon.
A country called Sherwood is very heavily covered with a forest of 50,000 trees. There are proposals
to clear some of Sherwood’s forest and grow corn, but obtaining this additional economic output will have an environmental cost from reducing the number of trees. Table 12.11 shows possible combinations of economic output and environmental protection.
a. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the number of trees, and the quantity of economic output, measured in corn, on the vertical axis.
b. Which choices display productive efficiency? How can you tell?
c. Which choices show allocative efficiency? How can you tell?
d. In the choice between T and R, decide which one is better. Why?
e. In the choice between T and S, can you say which one is better, and why?
f. If you had to guess, which choice would you think is more likely to represent a command-and-control
environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice Q or S? Why?
Can extreme levels of pollution hurt the economic
development of a high-income country? Why or why
not?
Consider the case of global environmental problems that spill across international borders as a prisoner’s dilemma of the sort studied in Monopolistic Competition and Oligopoly. Say that there are two countries, A and B. Each country can choose whether to protect the environment, at a cost of , or not to protect it, at a cost of zero. If one country decides to protect the environment, there is a benefit of , but the benefit is divided equally between the two countries. If both countries decide to protect the environment, there is a benefit of , which is divided equally between the two countries.
a. In Table , fill in the costs, benefits, and total payoffs to the countries of the following decisions. Explain why, without some international agreement, they are likely to end up with neither country acting to protect the environment.
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