2. Cheah Joe Seng 65631 

3. Yow Kok Xiang 68141 

4. Chai Ming Xi 68489 

5. Raymond Wong Tiiung Ing 67549 

1. Argues that under the right conditions parties to a dispute over property rights will be able to negotiate an economically optimal solution, regardless of the initial distribution of the property rights.

2. Offers a potentially useful way to think about how to best resolve conflicts between competing business or other economic uses of limited resources.

 

1. Taxes and subsidies: to tackle the problem of externalities is a market-based method of control as it works through the price system. 

a) If negative externalities exist, and there is allocative inefficiency at the free market price then the appropriate solution would be to tax the good.

b) If the market is under-producing, it would be appropriate for the government to grant a subsidy.

1. Emissions fee: like the Pigouvian tax, but the tax is per unit of pollution.

a) The advantage of an emissions fee is that it makes pollution more expensive and creates incentive for firms to use cleaner technology. Firms will decrease pollution as long as the fee is above MC of reducing emissions.

2. Command-and-control regulations: 

a) Technology standard: requires firms to install a certain level of technology to reduce their pollution. It is not cost effective.

b) Performance standard: sets emissions goals for each polluter, it is more flexible than the technology standard as firms are allowed to cut back emissions in any way they want. For this reason, it is more cost effective and creates incentive for firms to innovate. 

3. Cap-and-trade: the government gives or sells permits to pollute to firms, but no more than the effective amount. The same problem occurs as it is expensive to measure pollution. The difference between cap-and-trade and emission fee:

a) Responsiveness to inflation: Higher inflation decreases the real emissions fee, leads to less pollution reduction. 

b) Responsiveness to cost changes. Comparable to changes inflation, increases in the marginal costs of reducing pollution.

1. Argues that under the right conditions parties to a dispute over property rights will be able to negotiate an economically optimal solution, regardless of the initial distribution of the property rights.

2. Offers a potentially useful way to think about how to best resolve conflicts between competing business or other economic uses of limited resources.

 

1. Taxes and subsidies: to tackle the problem of externalities is a market-based method of control as it works through the price system. 

a) If negative externalities exist, and there is allocative inefficiency at the free market price then the appropriate solution would be to tax the good.

b) If the market is under-producing, it would be appropriate for the government to grant a subsidy.

1. Emissions fee: like the Pigouvian tax, but the tax is per unit of pollution.

a) The advantage of an emissions fee is that it makes pollution more expensive and creates incentive for firms to use cleaner technology. Firms will decrease pollution as long as the fee is above MC of reducing emissions.

2. Command-and-control regulations: 

a) Technology standard: requires firms to install a certain level of technology to reduce their pollution. It is not cost effective.

b) Performance standard: sets emissions goals for each polluter, it is more flexible than the technology standard as firms are allowed to cut back emissions in any way they want. For this reason, it is more cost effective and creates incentive for firms to innovate. 

3. Cap-and-trade: the government gives or sells permits to pollute to firms, but no more than the effective amount. The same problem occurs as it is expensive to measure pollution. The difference between cap-and-trade and emission fee:

a) Responsiveness to inflation: Higher inflation decreases the real emissions fee, leads to less pollution reduction. 

b) Responsiveness to cost changes. Comparable to changes inflation, increases in the marginal costs of reducing pollution.

2. Husna bt Mazi (66146)

3. Aziah Aziana binti Roslee (65518)

1. Argues that under the right conditions parties to a dispute over property rights will be able to negotiate an economically optimal solution, regardless of the initial distribution of the property rights.

2. Offers a potentially useful way to think about how to best resolve conflicts between competing business or other economic uses of limited resources.

 

1. Taxes and subsidies: to tackle the problem of externalities is a market-based method of control as it works through the price system. 

a) If negative externalities exist, and there is allocative inefficiency at the free market price then the appropriate solution would be to tax the good.

b) If the market is under-producing, it would be appropriate for the government to grant a subsidy.

1. Emissions fee: like the Pigouvian tax, but the tax is per unit of pollution.

a) The advantage of an emissions fee is that it makes pollution more expensive and creates incentive for firms to use cleaner technology. Firms will decrease pollution as long as the fee is above MC of reducing emissions.

2. Command-and-control regulations: 

a) Technology standard: requires firms to install a certain level of technology to reduce their pollution. It is not cost effective.

b) Performance standard: sets emissions goals for each polluter, it is more flexible than the technology standard as firms are allowed to cut back emissions in any way they want. For this reason, it is more cost effective and creates incentive for firms to innovate. 

3. Cap-and-trade: the government gives or sells permits to pollute to firms, but no more than the effective amount. The same problem occurs as it is expensive to measure pollution. The difference between cap-and-trade and emission fee:

a) Responsiveness to inflation: Higher inflation decreases the real emissions fee, leads to less pollution reduction. 

b) Responsiveness to cost changes. Comparable to changes inflation, increases in the marginal costs of reducing pollution.

1.                  Arthur Isaac Moses (65484) 

2.                  Carine anak Dunstun (65589) 

3.                  Husna bt Mazi (66146) 

4.                  Ania anak Wilfred (65448) 

Solution to externalities 

1.      Coase Theorem 

-          When there are well-defined property rights and costless bargaining, then negotiations between the party creating the externality and the party affected by the externality can bring about the socially optimal market quantity. The efficient solution to an externality does not depend on which party is assigned the property rights, as long as someone is assigned those rights. 

 

 

Public response 

2.      Taxes and subsidies 

-          Taxes as solution negative externalities in the street market as with the coasion payment, tax internalizes the externality and remove inefficiency of negative externality. While, subsidies is to ensure higher level of consumption and production than would arise through the completely the interaction of market force. 

 

3.      Emission fee 

-          Emission fee is the social cost of external damage imposed to firms for per unit of pollution produced. this creates a disadvantages to the firm in production because of negative externalities they release often increase with the increase in production quantity. 

 

4.      Command and control 

-          Command-and-control regulation sets specific limits for pollution emissions and/or mandates that specific pollution-control technologies that must be used. 

-          policy that require a given amount of pollution reduction with limited sources 

 

5.      Cap and Trade 

-          Cap and trade is market based approach to controlling pollution by providing economic incentives for achieving reductions in the emulsion of pollutions.