Assignment: Pollution Control
Instructions: You may work in groups but you must turn in your own work! Indicate on the front page who you worked with (max 3 people). An electronic copy must be submitted online before midnight on Friday. Show all work so that partial credit may be given.
For the next 4 questions, consider the following functions for a point source pollutant:
????D 270 -30??
????C= 15??
1. Consider a pollutant that causes damages according the above equation ????D where Q is the units of pollution abated. Local firms could reduce pollution at increasing costs given by the equation ????C. How much pollution should be cleaned up using economic criteria?
Show graphically and mathematically how you got to your answer.
2. Suppose that the government places a standard level of pollution equal to 4 units of pollution. Assuming the equations above represent the relevant cost curves, would this be a good policy? Explain fully using graphs, math and economic rationale.
3. Economists have urged the local government to use a tax instead of a standard. Assuming that the cost curves above are known to the economists and government, what is the appropriate tax rate? Explain in detail why this tax rate would induce efficient pollution control behavior.
4. The government is still not convinced that a tax is better than a standard. Explain to the politician why an efficient tax is better than a standard assuming that the standard were also set optimally.
5. Read the following article regarding the "History of Reducing Air Pollution from Transportation in the United States." (https://www.epa.gov/transportation-air-pollutionand-climate-change/accomplishments-and-success-air-pollution-transportation) What has the US been doing to curb air pollution? According to this source, was the Clean Air Act an economically efficient policy? What is the benefit cost ratio?
Attachment:- History of Reducing Air Pollution.zip