The total profit from logging is $8,000, which is evenly divided among shareholders. Environmentalists wish to...
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The total profit from logging is $8,000, which is evenly divided among shareholders. Environmentalists wish to stop all logging and are willing to pay $25 each to do so. Neutral parties are uninterested in this debate. (a) Is a law banning logging Pareto optimal? Is it Kaldor- Hicks efficient? (b) Suppose that owners of the timber be fully compensated if logging were prohibited, but this would require raising tax revenue of $8,000 and paying it to shareholders. For each of the following scenarios, company would state whether a law banning logging, coupled with com- pensation, is Pareto optimal, and whether it is Kaldor- Hicks efficient: (i) The tax is assessed equally on both environmental- ists and neutral parties; (ii) The tax is assessed only on environmentalists. The total profit from logging is $8,000, which is evenly divided among shareholders. Environmentalists wish to stop all logging and are willing to pay $25 each to do so. Neutral parties are uninterested in this debate. (a) Is a law banning logging Pareto optimal? Is it Kaldor- Hicks efficient? (b) Suppose that owners of the timber be fully compensated if logging were prohibited, but this would require raising tax revenue of $8,000 and paying it to shareholders. For each of the following scenarios, company would state whether a law banning logging, coupled with com- pensation, is Pareto optimal, and whether it is Kaldor- Hicks efficient: (i) The tax is assessed equally on both environmental- ists and neutral parties; (ii) The tax is assessed only on environmentalists.
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A law banning logging which is not coupled with compensation is not Pareto Optimal The shareholders ... View the full answer
Related Book For
Survey of Accounting
ISBN: 978-0078110856
3rd Edition
Authors: Thomas P. Edmonds, Frances M. McNair, Philip R. Olds, Bor-Yi
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