Referring back to the previous question, assume that before the imposition of the import tariff, the country consumed annually 900 million tons of coal mined domestically mined, at a price of $66 per ton How would the CBA of the import tariff change if, after imposition of the import tariff, the following circumstances are assumed to result from some energy consumers switching from renewably produced energy to coal Annual consumption of coal rises by 40 million tons, but the price of coal remains unchanged Annual consumption of coal rises by 40 million tons and the price of coal rises to $69 per ton (here assume that the prices of other goods, including coal, were not held constant in estimating the demand schedule for renewable energy ) Annual consumption of coal rises by 40 million tons and the price of coal rises to $69 per ton (here assume that the prices of other goods, including coal, were held constant in estimating the demand schedule for renewable energy and also that the demand for coal is completely inelastic ) The market price of coal underestimates its marginal social cost because the coal mined in the country generates a pollution externality evaluated at $7 per ton (here assume that the annual consumption of coal rises by 40 million short tons, but the price of coal remains unchanged )

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 08, 2024

Referring back to the previous question, assume that before the imposition of the import tariff, the country consumed annually 900 million tons of coal mined

Referring back to the previous question, assume that before the imposition of the import tariff, the country consumed annually 900 million tons of coal mined domestically mined, at a price of $66 per ton. How would the CBA of the import tariff change if, after imposition of the import tariff, the following circumstances are assumed to result from some energy consumers switching from renewably produced energy to coal?

Annual consumption of coal rises by 40 million tons, but the price of coal remains unchanged.
Annual consumption of coal rises by 40 million tons and the price of coal rises to $69 per ton. (here: assume that the prices of other goods, including coal, were not held constant in estimating the demand schedule for renewable energy.)
Annual consumption of coal rises by 40 million tons and the price of coal rises to $69 per ton. (here: assume that the prices of other goods, including coal, were held constant in estimating the demand schedule for renewable energy and also that the demand for coal is completely inelastic.)
The market price of coal underestimates its marginal social cost because the coal mined in the country generates a pollution externality evaluated at $7 per ton. (here: assume that the annual consumption of coal rises by 40 million short tons, but the price of coal remains unchanged.)