1. Compare and contrast environmental standards, corrective taxes and tradeable permits. Discuss the pros and cons of each type of public policy instrument. When should a quantity regulation be placed as opposed to a price regulation?
Finally, comment on your take on President Obama’soverall efforts (Links to an external site.) to reduce greenhouse gas emissions. Use appropriate data and references.
2. Suppose that the demand for a chemical is given by Q = 80 – 4P, where quantity is measured in pounds. The market supply is given byMC = 10. Assume that the marginal external damage of this product is $5 per unit.
a. What is the equilibrium price and quantity of this good in a private market without government intervention? What is the socially desired equilibrium price and quantity?
b. What level of taxation would generate the socially efficient level of the good from part (a)?