Question
Assume the atmosphere of an urban area is able to reabsorb 4,000 tonnes of pollutants per year. The schedule below shows the price polluters would
Assume the atmosphere of an urban area is able to reabsorb 4,000 tonnes of pollutants per year. The schedule below shows the price polluters would be willing to pay for the right to dispose of 1 tonne of pollutants per year and the total quantity of pollutants they would wish to dispose of at each price
| Price (per tonne of pollutant rights) | Total quantity of pollutant rights demanded (tonnes) |
| $0 | 8,000 |
| 1,000 | 7,000 |
| 2,000 | 6,000 |
| 3,000 | 5,000 |
| 4,000 | 4,000 |
| 5,000 | 3,000 |
| 6,000 | 2,000 |
| 7,000 | 1,000 |
(a) If there were no emission fee, how many tonnes of pollutants would there be and how much greater would this amount be than the capacity for re-absorption? (b) What pollution fee should the urban authorities charge to solve the problem? (c) What would happen in this market for pollution rights if quantity demanded increased by 1,000 tonnes at each price?
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Bank Management
Authors: Timothy W Koch, Mark S Cracolice
7th Edition
1111804265, 9781111804268
