Business, 24.06.2021 03:30 chy2313

One approach to the problem of pollution control in a market economy is to sell pollution credits, which are also known as externality rights. The local pollution-control agency has determined that 200 tons of pollutants may be released without harm to the biological ecosystem into the local lake every year. The city has made 200 pollution credits available every year, where each credit owner is allowed to release 1 ton of pollutants into the lake annually. Required:
a. Draw a correctly labeled graph illustrating the effect of unregulated pollution in the market for paper and identify the following.
1. Marginal private cost
2. Marginal external cost.

b. Draw a correctly labeled graph for the pollution credits and use your graph to explain how the pollution credits can address the pollution problem in your city.
c. Evaluate the effectiveness of pollution credits as a means to control pollution. Specifically, consider the following

1. Costs to consumers, producers, and the general public.
2. Benefits to consumers, producers, and the general public.

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