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    Environmental Pollution Market Activities

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    Sometimes market activities (production, buying and selling) have unintended positive or negative effects outside the market's scope. This is called an externality. Suppose that you are a policy maker concerned with correcting the effects of gases and particulates emitted by and local power plant. What tools would you use? What would be the benefits of the action? What would be the costs? How would you decide what was the best level of emission reduction? Why do you think your approach would be better than others? (Hint: See Chapter 31)

    Cost and Benefit analysis can be used to justify eliminating pollution. There are two levels of analysis. The society must decide on the optimal level of pollution. For example, if a factory were creating $100,000 per year in damages due to pollution it would not make sense to pay $500,000 to eliminate it. It would be best to pay the damages of $100, 000 and continue to pollute. Second, if pollution should be eliminated, the society must decide how to eliminate the pollution: regulation (uniform abatement policy), tax on pollution, or selling permits to pollute. To understand the analysis, it is best to consider marginal benefit and the marginal cost of any new program or activity. See Chapter 31. Reminder: distinguish the analysis decision that determines how much pollution should be allowed from the analysis that determines "how" to eliminate the pollution. For external cost of production, see page 678. For additional sources, see Robert W. Crandall, "Pollution Controls", in Concise Encyclopedia of Economics, retrieved from http://www.econlib.org/library/Enc/PollutionControls.html

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    Solution Preview

    The response addresses the queries posted in 379 words with references.

    //Before lettering about the externality and the market activities, we have to understand the reasons for 'Environmental Pollution'. We will discuss about the policies to be implemented for reducing the extent of environmental pollution. The tools for reducing the emission of gases and particulates in the environment and the benefits of implementing the tools will also be discussed. Along with this, the cost to be incurred by the local power plant and the approaches for making things better in the environment will also be focused upon.//

    Environmental pollution

    As a policy maker, I would like to use a new tax system which is based on market and pollution control equipments like thermal oxidizers to control the effect of gases on the environment because this is the most efficient mean of ...

    Solution Summary

    The response addresses the queries posted in 379 Words, APA References.