As the extent of environmental protection expands, would you expect marginal costs of environmental protection to rise or fall? Why or why not?

Short Answer

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As the extent of environmental protection expands marginal costs of environmental protection will rise.

Step by step solution

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Step 1. Definition of Environmental Protection

Environmental protection refers to the activities that are maintained or restored the quality of environment.

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Step 2. Basic understanding

We all know in the real world phenomena reducing pollution is costly whether pollution is being reduced with the help of technologies or by paying charges like pollution charge. We can tell with just basic knowledge that environmental protection would cost more.

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Step 3. Graph for explaining the reason for rising marginal cost with an extent of environmental protection

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Step 4. Explaining the graph

When the quantity of environmental protection is low so that pollution is extensive - for example, at quantity Q1 - there are usually numerous relatively cheap and easy ways to reduce pollution, and the marginal benefits of doing so are quite high. At Q1, it makes sense to allocate more resources to fight pollution. However, as the extent of environmental protection increases, the cheap and easy ways of reducing pollution begin to decrease, and one must use more costly methods. The marginal cost curve rises. Also, as environmental protection increases, one achieves the largest marginal benefits first, followed by reduced marginal benefits. As the quantity of environmental protection increases to, say, Q2, the gap between marginal benefits and marginal costs narrows. At point Q3 the marginal costs will exceed the marginal benefits. At this level of environmental protection, society is not allocating resources efficiently, because it is forfeiting too many resources to reduce pollution.

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Most popular questions from this chapter

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 10, or not to protect it, at a cost of zero. If

one country decides to protect the environment, there is a benefit of 16, but the benefit is divided equally between the two countries. If both countries decide to protect the environment, there is a benefit of 32, which is divided equally

between the two countries.

a. In Table 12.10, 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.

What are better-defined property rights and what incentive do they provide to account for external costs?

For each of your answers to Exercise 12.2, will equilibrium price rise or fall or stay the same?

a. Firms in an industry are required to pay a fine for their carbon dioxide emissions.

b. Companies are sued for polluting the water in a river.

c. Power plants in a specific city are not required to address the impact of their air quality emissions.

d. Companies that use fracking to remove oil and gas from rock are required to clean up the damage.

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?

What is a marketable permit and what incentive does it provide for a firm to account for external costs?

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