The graph below shows the MB of pollution control (which are known) and the MAC of...

 

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The graph below shows the MB of pollution control (which are known) and the MAC of pollution control, which are uncertain. The graph indicates the true MAC as well as the MAC that has been estimated by the regulator. a. Draw in taxº (the tax the regulator would actually set), tax* (the efficient tax), permit (the quantity of pollution abatement required under a permit policy set by the regulator), and permit* (the quantity of pollution abatement required under an efficient permit policy) b. Shade the area that represents the deadweight loss when the regulator set a tax at Taxo C. Shade the area that represents the deadweight loss when the regulator issues permits corresponding with abatement level permitº d. Which policy is better in this instance, a tax policy or a permit policy? Why? (you should relate your answer to "why" back to the relative shapes of the MB and MC curves) LA MACESTIMATED MACTRUE MB ABATEMENT The graph below shows the MB of pollution control (which are known) and the MAC of pollution control, which are uncertain. The graph indicates the true MAC as well as the MAC that has been estimated by the regulator. a. Draw in taxº (the tax the regulator would actually set), tax* (the efficient tax), permit (the quantity of pollution abatement required under a permit policy set by the regulator), and permit* (the quantity of pollution abatement required under an efficient permit policy) b. Shade the area that represents the deadweight loss when the regulator set a tax at Taxo C. Shade the area that represents the deadweight loss when the regulator issues permits corresponding with abatement level permitº d. Which policy is better in this instance, a tax policy or a permit policy? Why? (you should relate your answer to "why" back to the relative shapes of the MB and MC curves) LA MACESTIMATED MACTRUE MB ABATEMENT

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a Draw the tax the tax the regulator would set tax the efficient tax permit the quantity of pollut... View the full answer