Problem

An emissions tax on a quantity of emissions from …

01:20

Problem 6 Easy Difficulty

Classify the following pollution-control policies as command-and-control or market incentive based.
a. A state emissions tax on the quantity of carbon emitted by each firm.
b. The federal government requires domestic auto companies to improve car emissions by $2020 .$
c. The EPA sets national standards for water quality.
d. A city sells permits to firms that allow them to emit a specified quantity of pollution.
e. The federal government pays fishermen to preserve salmon.

Answer

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Principles of Microeconomics for AP® Courses

Chapter 12

Environmental Protection and Negative Externalities

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Video Transcript

All right, you're gonna identify if regulation or ah, control of an externality is command and control, or it's a market based incentive. So we're gonna start here with party, and it's a state of missions tax on. This is a market based incentive, because what attacks does is that it shifts a firm's supply curve. Uh, and again, this ship's is a firm supply or demand curve that is gonna be a more commissions. And because it's influencing the market next, it's federal car regulation. This is a command base incentive. This is a command rates intendant because the government stopped really giving you a choice. It's not really increasing the cost of the materials of the car. It's just commanding, went to do most one man on funded regulations or command, and so the e. P. A. Says water regulations. This is also a command based. The solution to externalities. It's city cells of permits to pollute. This is a market based incentive because by because the city's Aaron influence of supply and demand her so what happens here is we have a mantra. Viewers of liker of here and since there's a limited number of suppliers, the supply curve between shoot this way. And so what that does is it creates an equilibrium over here. What is that? A lower quantity of the product where two deals be externality. And finally we had the federal government paying the fishermen not to fish. This is also in market breeze incentive, because the federal government is once again influence in the supply term, Um, make it more profitable for them to knock resources to fish, which decreases the supply, which solves the externality. So it's the same situation, Uh, these three And these two, uh, there's no short sort of real change on the market craft. It's just something that the companies have to enforce.

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