Refer to the Figures Below to Answer This Question

question 12

Essay

Refer to the figures below to answer this question:
Cap-and-trade versus emissions fee when marginal social benefits are inelastic and costs are uncertain: Cap-and-trade versus emissions fee when marginal social benefits are elastic and costs are uncertain:
a)In case of an inelastic marginal social benefit curve,what type of pollution reduction system should the government employ? Why?
b)If the social benefit curve is elastic,do you answer change?
c)What are advantages and disadvantages of Cap-and-Trade systems over Emission Fee systems when the inflation and change in marginal costs are considered?

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Definitions:

Fixed Manufacturing Overhead

The sum of all regular, non-variable costs involved in manufacturing, including rent, salaries of permanent staff, and maintenance of equipment.

Absorption Costing

An accounting method that includes all manufacturing costs, such as direct materials, direct labor, and both variable and fixed manufacturing overhead, in the cost of a product.

Unit Product Cost

The total cost associated with producing one unit of product, encompassing both fixed and variable costs.

Operations

Refers to the day-to-day activities involved in the running of a business for the purpose of producing value for the stakeholders.