microeconomic

Sometimes market activities (production, buying, and selling) have unintended positive or

negative effects outside the market's scope, like pollution. These are called

externalities

.

Assume that you are a policy maker concerned with correcting the

effects of gases and

particulates emitted by a local power plant. Write a 1

-

page memo that addresses the following

points:

·

Select 1 of the following policies from the following list that you think would best reduce

emiss

ions: Pigouvian taxes, emission taxes, or cap and trade. Explain it.

·

Why do you think your policy would work in reducing the total amount of emissions?

·

In your answer, explain the costs and the benefits of the production and consumption of

the good, as w

ell as the negative externality.

·

How would you decide what the best or optimal level of emission reduction would be?

Format your answers as a memo with 1 page of written content. You may use bullet points, but

please cite your sources. Include a referenc

e list.

Sometimes market activities (production, buying, and selling) have unintended positive or

negative effects outside the market's scope, like pollution. These are called externalities.

Assume that you are a policy maker concerned with correcting the effects of gases and

particulates emitted by a local power plant. Write a 1-page memo that addresses the following

points:

 Select 1 of the following policies from the following list that you think would best reduce

emissions: Pigouvian taxes, emission taxes, or cap and trade. Explain it.

 Why do you think your policy would work in reducing the total amount of emissions?

 In your answer, explain the costs and the benefits of the production and consumption of

the good, as well as the negative externality.

 How would you decide what the best or optimal level of emission reduction would be?

Format your answers as a memo with 1 page of written content. You may use bullet points, but

please cite your sources. Include a reference list.