BUSAD 120 Chapter Notes - Chapter 1: Gdp Deflator, Xm Satellite Radio
Document Summary
The equivalence of pigocian taxes and pollution permits. Economists usually prefer market-based policies over regulations as a way to deal with pollution. Market-based policies are more efficient than regulation because they achieve the target at a lower cost to society (when firms/individuals have a different cost to pollute. Furthermore, market-based policies provide polluters with a stronger incentive to use cleaner technology. Corrective taxes (market-based) are more efficient than regulation. Suppose there are two firms, x and y. Firm x has a lower demand for pollution than firm y. In the absence of any policy, firm x would pollute 300 units and firm y 500 units. Key: for firm x and y, the benefit from polluting this much are measured by the area below their demand curves. Suppose the government targets an overall level of pollution equal to 400 units of pollution. Suppose to achieve it, the government requires that each firm can pollute no more than 200 (regulation)
