SOLUTIONS MANUAL - Microeconomics Second Edition Roger LeRoy Mille...

SOLUTIONS MANUAL

for

Economics Today:

A Canadian Perspective, Microeconomics Second Edition Roger LeRoy Miller James H igginson Mushtaq Ahmad Igor Siljanoski This is the Only Original Solutions Manual for 2 nd Edition, All other Files in the Market are Fake/Old/Wrong Edition. All Chapters 1-15, 10 0% Original Verified, A+ Grade.All Chapters Arranged

Reverse: Chapter 15-1. 1 / 4

Chapter 15 Environmental Economics  Answers to Questions for Critical Analysis A

POTENTIALLY HIGH MARGINAL COST OF PLASTIC-POLLUTION ABATEMENT IN KENYA

Why do you suppose that some critics of the plastic-bag ban argue that the adverse effects of deforestation caused by increased production of paper bags should also be added to the marginal cost of plastic-pollution abatement?To determine the socially optimal level of plastic-bag production, all the costs of plastic- pollution abatement must be considered. This includes costs of reducing pollution by plastic bags plus any other costs that society must bear. Because paper bags are a substitute for plastic bags, reducing the pollution caused by plastic bags will decrease production of plastic bags and

increase production of paper bags. This, in turn, will cause additional social costs, like deforestation. Therefore, this unintended effect must be considered to find the socially optimal

level of plastic pollution.

AI:

MANAGING DECISIONS WITHIN THE EUROPEAN EMISSIONS TRADING SYSTEM

Why do you suppose that in light of the fact that European firms are increasing the use of AI

systems in their emissions planning, some European policymakers have also begun to employ

those same AI systems to guide their own policy actions?The goal of European policymakers is to reduce future emissions and remain popular in the

public’s eye. They can use these same AI systems to try to maximize expected future goals (reduction in emissions and increased popularity) given the uncertainty they face.

COMMON

PROPERTY, THE “PARADOX OF PLENTY,” AND GAINS FROM ASSIGNING RESOURCE

PROPERTY

RIGHTS

You have been named head resource manager in a small country with abundant supplies of cobalt. The politicians who hired you have promised the nation more jobs in that industry,

which is 100 percent owned by the government. What will you do?In order to please your bosses, your natural tendency is going to be to extract cobalt at a rapid pace such that you can justify hiring more citizens to work in that industry.You have less of an

incentive to maximize the net present value of the cobalt within your country because that would most likely mean extracting it at a slower pace and therefore hiring fewer citizens in that industry.Otherwise stated, you will decide to extract this nonrenewable resource at a faster pace than if cobalt reserves were owned by private individuals or companies.Your short-run goals matter

more than the long-run benefit to the country of extracting cobalt at a slower pace.

COULD

SOUTH AFRICAN RHINO POACHING BE STOPPED BY LEGALIZING TRADE IN RHINO

HORNS?

Critics of the idea of legalizing private rhino ranching and trade in rhino horns worry that it could generate an additional increase in demand for the horns. Is it possible that the overall

population of rhinos still might increase even if a further rise in demand for legally traded rhino horns were to occur? Explain your reasoning..

15-1 2 / 4

ISM for Miller et al. • Microeconomics, Second Edition

Yes. The increased demand for rhino horns would increase the price of the horns and increase the quantity sold. These increases could result in increases in economic profits for rhino ranchers. If there are no restrictions to entry in the rhino market, more ranchers will join the industry (an increase in supply), more rhinos will be bred, and more rhino horns will be produced. Economics in Your Life

REMOVING

INDIVIDUAL TREES FROM VIEW TO ENSURE SEEING THE FOREST

For Critical Thinking Can you think of any transaction costs that would hinder efforts to address common property problems associated with a forest by assigning property rights to plots of land containing trees that make up a forest?Yes, you would need to locate the appropriate people to which you would assign the property rights (time costs). Then you would need to create enforceable contracts that give those people the rights to those lands.Real Application If your house is located in a forested area, what is the optimal amount of forest maintenance that you should undertake?First of all, we have to know whether you own the land around your house on which the trees grow.Undoubtedly, if the government owns that land, you probably cannot legally do any

private maintenance to reduce the fire risk.In contrast, if you do own forested land surrounding your house, you have an incentive to maintain that land.Maintenance here would involve clearing dead and diseased trees, and in

general reducing the amount of potential “kindling” that could catch fire easily.You may

even choose to conduct a “controlled burn” to eliminate dry shrubs and reduce fire risk.The optimal amount of forest maintenance, however, is not infinite, to be sure.Rather, you

will spend your own resources up to the point where the marginal benefit equals the marginal cost. Issues & Applications

EUROPEAN

AUTHORITIES RESTRAIN THE SUPPLY OF EMISSIONS ALLOWANCES TO PUSH UP

THEIR PRICE For Critical Thinking If carbon dioxide-emission restrictions are working, what would you expect to happen?If these restrictions are working, greenhouse gas emissions should be reduced and there

should be an effect on climate change.Real Application You have just been elected premier of a hypothetical mountain province with a small population and relatively little industry. Would you ask your provincial legislature to implement the equivalent of the European Emissions Trading System? Why or why not?You probably would not consider such a political action to have much value either to the environment or to your province’s residents. After all, how much impact can any system .

15-2 3 / 4

Chapter 15 Environmental Economics

of carbon dioxide reduction in your province have on the world’s production of carbon dioxide due to manufacturing and/or internal combustion vehicle use?Moreover, with little industry in your province, the market for tradable carbon- dioxide-emission allowances would probably be nonexistent. Finally, in the political arena, there would probably be pressure for you to increase manufacturing activity rather than decrease it to fight carbon dioxide emissions. Answers to End-of-Chapter Questions 15-1. The market price of insecticide is initially $10 per unit. To address a negative externality in this market, the government decides to charge producers of insecticide the social cost of polluting during the production process. A fee that fully takes into account the social costs of pollution is determined, and once it is put into effect, the market supply curve for insecticide shifts upward by $4 per unit. The market price of insecticide also increases, to $12 per unit. What fee is the government charging insecticide manufacturers?

$4 per unit, which exactly accounts for the per-unit social cost of pollution.

15-2. One possible method for reducing emissions of greenhouse gases such as carbon dioxide is to inject the gases into deep saltwater-laden rock formations, where they would be trapped for thousands of years. Suppose that the federal government provides a fixed per- unit subsidy to firms that use this technology in West Virginia and other locales where such rock formations are known to exist.

• Consider the effects of the government subsidy on the production and sale of

equipment that injects greenhouse gases into underground rock formations. What happens to the market clearing price of such pollution abatement equipment?

• Who pays to achieve the results discussed in part (a)?

• Payment of subsidy on the production and sale of equipment that injects the

greenhouse gases into underground rock formations will increase the supply of the equipment. The resulting movement along the demand curve for such equipment will lower the market clearing price of the equipment. The increase in the quantity demanded for the equipment reflects the desire by the government to increase the removal of greenhouse gases from the atmosphere.

• The government funds subsidy payments from tax receipts, so taxpayers finance the

subsidy.

.15-3

• / 4