Suppose that a government imposes an emmision standard, and per-unit fines for exceeding that standard, at...

Suppose that a government imposes an emmision standard, and per-unit fines for exceeding that standard, at the socially efficient pollution level. if polluters believe that the probability of detecting standard breaches is not certain, illustrate the privately efficient outcome and any associated welfare loss. What per unit fine would induce a socially efficient outcome?

Expert Solution

Compliance benefits tend to be high at early rate of compliance because the fear of being caught or magnitude of the punishments for a firm is higher when it does not comply at all or comply a little bit than another firm which complies at higher rate than the earlier firm.

Similarly, when firms comply more and more then the fear or magnitude of punishment lessens as the likelihood of being caught reduces. To which, the benefits seem lesser at higher rate of compliance.

If polluters have some probability assurance that detecting standard breaches is not certain then each pollter will abate or reach a level of pollution reduction below from which the fine would cost him more than the incentive to pollute less.

in other owrds lets say there is 50% chance of failure of detection. Because of this 50% chance polluters have 50% chance of saving from not abating till the imposed standard. The polluetrs will not abate above the level where the saving from 50% chance of not being caught would be more than the fine that they would have to pay if they get caught.

In order to make the solution socially efficient the tax should be equal to the saving that they would save from not abatiing till the standard level.

Rahul Sunny answered 2 years ago

If the government imposes unit sales tax (i.e., $ tax per unit sold) on a product,...

If the government imposes unit sales tax (i.e., $ tax per unit sold) on a product, which one, demand, or supply will shift? Increase or decrease? Will the new tax cause "disequilibrium"? Please state clearly about the shift (leftward or rightward) and the equilibrium price and quantity change. No graph is required.

To mitigate environmental costs, suppose the state of Arkansas imposes a severance tax (a per-unit extraction...

To mitigate environmental costs, suppose the state of Arkansas imposes a severance tax (a per-unit extraction tax) on a depletable resource with an increasing marginal extraction cost. Suppose there also exists a renewable substitute with a constant marginal extraction cost. Assuming a dynamically efficient allocation, how does the severance tax affect the quantity of the depletable resource extracted? Does the severance tax affect the switch point (if one occurs)?

Suppose that the government imposes a $1 tax on a good that currently sells for a...

Suppose that the government imposes a $1 tax on a good that currently sells for a price of $5. Also, assume that after the tax is imposed, the good sells for $5.60. Which statement best explains the effect this has on the tax burden? a. The tax burden is being passed on to buyers. b. The tax burden is being carried by sellers. c. The tax burden is being shared between buyers and sellers. d. The tax burden is precisely...

Suppose that the government of China decided to impose a per unit tax on the suppliers...

Suppose that the government of China decided to impose a per unit tax on the suppliers of salt. a. Using a supply and demand model, show and explain the impact that the per-unit tax had on the equilibrium price and quantity of salt. b. Using the diagram created for your answer to (a), show and explain what effect the per unit tax had on consumer surplus, producer surplus and deadweight loss. c. List three reasons a government may impose a...

Suppose the government imposed an excise tax of $1 per unit on a good. Suppose further...

Suppose the government imposed an excise tax of $1 per unit on a good. Suppose further that the price elasticity of demand for the good is 2 and the price elasticity of supply for it is 3. 1.) What percentage of the tax will be borne by the buyers? 2.) What percentage of the tax will be borne by the sellers? 3.) The price buyers pay for the good after the tax is levied will be _____ than the price...

A surplus may occur if: a. the government imposes a price ceiling. b. the government imposes...

A surplus may occur if: a. the government imposes a price ceiling. b. the government imposes a price floor. PLEASE ANSWER ONLY IF YOU ARE 100% CORRECT

Suppose that the local government determines that the price of food is too high and imposes...

Suppose that the local government determines that the price of food is too high and imposes a ceiling on the market price of food that is below the equilibrium price in that locality. Predict some of the consequences of this ceiling

Suppose that the government was taxing consumers of widgets by $3 per unit. Now it repeals...

Suppose that the government was taxing consumers of widgets by $3 per unit. Now it repeals the tax on consumers and replaces it with a $3 per unit tax on producers. What will happen to the price of widgets? a. The price will rise by $3 b. The price will rise, but by less than $3 c. The price will be unchanged d. The price will fall, but by less than $3 e. The price will fall by $3

A tax on hamburgers Suppose a state government imposes a tax on sales of hamburgers. Before...

A tax on hamburgers Suppose a state government imposes a tax on sales of hamburgers. Before the tax, 16 million hamburgers were sold at $3.25 per hamburger. With the tax in effect, 14 million hamburgers are sold, buyers pay $3.75 per hamburger, and sellers receive $3.00 per hamburger. In the scenario above, what is the tax ($ per hamburger)? In the scenario above, what is the tax incidence that falls on the sellers of hamburgers? ($ per six pack)?

Consider a competitive industry. Suppose the government imposes a binding price floor (that is, a minimum...

Consider a competitive industry. Suppose the government imposes a binding price floor (that is, a minimum price that is above the prevailing equilibrium price). a) How will the policy affect the amount a typical firm in the industry wants to supply? Will the firm necessarily be able to sell as much of the good as it wants to? b) Will the policy cause a deadweight loss?

Question