SouthState Chemical Co. produces pine oil cleaners in a process that produces emissions that discolor the paint on nearby houses, although the emissions have been declared nontoxic to humans.
a. Is the price for the cleaner likely to be allocatively efficient? Use a graphic illustration in your answer.
b. If your answer to (a) is no, what is an appropriate government policy to correct the problem?
What will be an ideal response?
a. No, the price for the cleaner is too low; marginal social cost is greater than marginal private cost. The graphic illustration should resemble Figure 15-2 in the text.b. The chemical company might be taxed to the extent of the damages sustained by homeowners to raise the marginal private cost to equal marginal social cost.
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Refer to Figure 4-15. For each unit sold, the price sellers receive after the tax (net of tax) is
A) $20. B) $22. C) $27. D) $32.
Suppose that unemployment increases because the government requires employers to provide more funds for their employees' retirement programs. The increase in unemployment is most likely a result of an increase in
A. frictional unemployment. B. structural unemployment. C. cyclical unemployment. D. the natural rate of unemployment.