Problems

26 . What arguments do low-income countries make in international discussions of global environmental clean-up? 27 . In the tradeoff between economic output and environmental protection, what do the combinations on the protection possibility curve represent? 28 . What does a point inside the production possibility frontier represent?

Critical Thinking Questions

29 . Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant. What information or data would you obtain to measure the external [not social] cost? 30 . Would environmentalists favor command-and-control policies as a way to reduce pollution? Why or why not? 31 . Consider two ways of protecting elephants from poachers in African countries. In one approach, the government sets up enormous national parks that have sufficient habitat for elephants to thrive and forbids all local people to enter the parks or to injure either the elephants or their habitat in any way. In a second approach, the government sets up national parks and designates 10 villages around the edges of the park as official tourist centers that become places where tourists can stay and bases for guided tours inside the national park. Consider the different incentives of local villagers—who often are living in poverty—in each of these plans. Which plan seems more likely to help the elephant population? 32 . Will a system of marketable permits work with thousands of firms? Why or why not? 33 . Is zero pollution possible under a marketable permits system? Why or why not? 34 . Is zero pollution an optimal goal? Why or why not? 35 . From an economic perspective, is it sound policy to pursue a goal of zero pollution? Why or why not? 36 . Recycling is a relatively inexpensive solution to much of the environmental contamination from plastics, glass, and other waste materials. Is it a sound policy to make it mandatory for everybody to recycle? 37 . Can extreme levels of pollution hurt the economic development of a high-income country? Why or why not? 38 . How can high-income countries benefit from covering much of the cost of reducing pollution created by low-income countries? 39 . Technological innovations shift the production possibility curve. Look at graph you sketched for Exercise 12.13. Which types of technologies should a country promote? Should “clean” technologies be promoted over other technologies? Why or why not?

Problems

40 . Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to the model to show the impact of the negative externality from second-hand smoking. (Hint: In this case it is the consumers, not the sellers, who are creating the negative externality.) Label the socially optimal output and price as Pe and Qe. On the graph, shade in the deadweight loss at the market output. 41 . Refer to Table 12.2. The externality created by the refrigerator production was $100. However, once we accounted for both the private and additional external costs, the market price increased by only $50. If the external costs were $100 why did the price only increase by $50 when we accounted for all costs? 42 . Table 12.12 shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. Qs1 is the quantity supplied without social costs. Qs2 is the quantity supplied with social costs. What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs, and then when we account for social costs. How does accounting for the externality affect the equilibrium price and quantity? P Qd Qs1 Qs2 $20 0 10 8 $18 1 9 7 $15 2.5 7.5 5.5 $12 4 6 4 $10 5 5 3 $5 7.5 2.5 0.5 TABLE 12.12 43 . A city currently emits 16 million gallons (MG) of raw sewage into a lake that is beside the city. Table 12.13 shows the total costs (TC) in thousands of dollars of cleaning up the sewage to different levels, together with the total benefits (TB) of doing so. Benefits include environmental, recreational, health, and industrial benefits. TC TB 16 MG Current Current 12 MG 50 800 8 MG 150 1300 4 MG 500 1850 0 MG 1200 2000 TABLE 12.13 a. Using the information in Table 12.13, calculate the marginal costs and marginal benefits of reducing sewage emissions for this city. b. What is the optimal level of sewage for this city? How can you tell? 44 . In the Land of Purity, there is only one form of pollution, called “gunk.” Table 12.14 shows possible combinations of economic output and reduction of gunk, depending on what kinds of environmental regulations you choose. Combos Eco Output Gunk Cleaned Up J 800 10% K 500 30% L 600 40% M 400 40% N 100 90% TABLE 12.14 a. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the percentage reduction of gunk, and with the quantity of economic output 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 K and L, can you say which one is better and why? e. In the choice between K and N, 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 L or M? Why?

FIGURE 13.1View from Voyager I (https://openstax.org/l/voyager1)Launched by NASA on September 5, 1977, Voyager I’s primary mission was to provide detailed images of Jupiter, Saturn, and their moons. It took this photograph of Jupiter on its journey. In August of 2012, Voyager I entered interstellar space—the first human-made object to do so—and it is expected to send data and images back to earth until 2025. Such a technological feat entails many economic principles. (Credit: modification of "Voyager's View of Jupiter's Great Red Spot" by NASA/ JPL, Public Domain)

In this chapter, you will learn about:

• Why the Private Sector Underinvests in Technologies
• How Governments Can Encourage Innovation
• Public Goods

BRING IT HOME The Benefits of Voyager I Endure The rapid growth of technology has increased our ability to access and process data, to navigate through a busy city, and to communicate with friends on the other side of the globe. The research and development efforts of citizens, scientists, firms, universities, and governments have truly revolutionized the modern economy. To get a sense of how far we have come in a short period of time, let’s compare one of humankind’s greatest achievements to the smartphone.