enviro econ midterm

what are the conditions of efficient free markets?

• Markets exist for all goods and services

• perfectly competitive

• symmetrical info

• assigned property rights

• No externalities exist

• There are no public goods

• Well-behaved utility and production functions

MPC + MEC =

MSC

What is coeasan bargaining?

if people are allowed to trade freely, they will have the most efficient outcome

what are the conditions for coeasean bargianing? what are the failures?

Clear ownership, no extra cost, symmetrical info, hard to assign ownership

what are the two types of pollution?

flow damage and stock damage

what are two types of mechanisms available for pollution control?

direct regulatory and incentive based

what is a cap-and-trade system?

the govt sets a cap on pollution and distributes an equal amount of permits

to reduce pollution, we need to

distribute cleanup work so that MAC is equal for everyone

what is the double dividend hypothesis?

the idea that a pollution tax provides an environmental and economic benefit

what is the revenue recycling effect?

the govt takes green tax revenue and puts it back into the economy

what is the tax interaction effect?

when companies get taxed for pollution, item price increases

find unregulated emissions

set MAC = 0

how many permits will each firm hold after trading?

MAC1=MAC2

what is the market clearing price for permits?

permit price = MAC

what is the TAC for each firm?

1/2(b)(h)

what determines how much a firm emits under a tax?

MAC = t

what is the efficient emissions level?

MDF = MAC

firms total payments under a tax?

t x E*

total cost of compliance under a tax?

TAC + tax payments