Policy with Uncertainty

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6 Terms

1
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What policy is preferred in the case of a relatively flat MB curve?

Price based

2
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What policy is preferred in the case of a relatively steep MB curve?

Quantity Based

3
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What would happen if the true MAC was higher in the case of a tax?

Firms under abate therefore too much pollution

4
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What would happen if the true MAC was lower in the case of a tax?

Firms over abate therefore too much cost

5
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What would happen if the true MAC was higher in the case of a cap and trade

High costs for permits, economic inefficiency

6
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What would happen if the true MAC was lower in the case of a cap and trade

Lost environmental benefits