The California Department of Agriculture (CDFA) has conducted a contingent valuationstudy and determined that vineyards provide...

The California Department of Agriculture (CDFA) has conducted a contingent valuationstudy and determined that vineyards provide an external benefit in the form of environmental amenities (i.e., attractive landscape for tourists) worth $50 million (on average, about $100 per acre of vines) per year. Suppose you are employed to advise thegovernment on policy. What policy would you recommend that the government should adopt with the aim of maximizing total economic welfare in California. Should we subsidize wine production? Please make your answer brief, but indicate specifically how the policy would be implemented. In addition, please discuss briefly any possible side effects of your recommended policy.

Expert Solution

The California Department of Agriculture (CDFA) has conducted a contingent valuationstudy and determined that vineyards provide an external benefit in the form of environmental amenities (i.e., attractive landscape for tourists) worth $50 million (on average, about $100 per acre of vines) per year. Suppose you are employed to advise thegovernment on policy. What policy would you recommend that the government should adopt with the aim of maximizing total economic welfare in California. Should we subsidize wine production? Please make your answer brief, but indicate specifically how the policy would be implemented. In addition, please discuss briefly any possible side effects of your recommended policy.

Answer: production of wine go through many stages and through out this making process there are emission of green house gases that is carbon dioxide , methane, carbon monoxide etc. This green house gases increases the temperature of environment and also play major role in ozone hole depletion. Although from business point of view it is a very good source to earn large revenue but from environmental point of view it is not beneficial. According to me as an advisor government should not give subsidies to produce wine more. According to health point of view also vine consumption is hazardous to our health and extra consumption of it leads to hypertension, cancer etc. Government should impose restrictions by providing licence so that people will restricted to wine production. Policy have a side effects because many restrictions on wine production will leads to decrease in revenue.

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Rahul Sunny answered 6 months ago

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