ECON 431 Final: ECON 431 Cal Poly SLO Final Exam 2007
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Question 1. (25 points) on january 1, 1998, the state of california introduced a ban on smoking in public bars because of health risks to employees and non-smoking patrons. Uncertainty and the choice of standards or taxes. Motor vehicles release nitrogen oxide ( nox ) and volatile organic compounds ( vocs ) that react with sunlight to produce ground-level ozone. Ground-level ozone is the primary ingredient in smog and can have harmful effects on human health and the environment. The state of california is considering a policy to control ground-level ozone pollution with one of two environmental policies: (1) a tax on gasoline; or (2) a standard on the quantity of gasoline service stations can sell. Suppose the marginal social cost per gallon of gasoline is known, but the government has only a rough estimate of consumer demand for gasoline. State your assumption(s) and justify your position with a diagram.
