The paper "Strengths and Weaknesses of Conventional Control and Command Regulation" is an outstanding example of a macro & microeconomics assignment. The PMC curve is the underlying supply curve which places a monetary value on the cost of crude pollution. Measurement of the costs of pollution may be determined by measuring additional health costs of exposure to crude pollution and the loss or reduction of working life or productivity (Callan & Thomas, 2010). This may be done through surveys’ in which the residents are asked what they deem to the maximum cost they are willing to pay in order to reduce pollution (Hanley et al, 2006).
The SMC curve is the social marginal cost of pollution which takes into consideration the producer costs incurred in the production of goods and services and externalities resulting from that process of production. Situations of negative externalities result in an SMC curve above the PMC curve as shown above. If the firms are not regulated they will produce quantity Q1 at the point at which the PMC curve cuts the demand curve. On the other hand at Q1 the marginal cost to the residents as shown by the SMC exceeds the benefits accrued to the society as shown by the demand curve.
As such the society would desire to reduce production to quantity Q2in order to have a situation in which the marginal benefit to society is equal to the marginal cost. At Q2 the pollution rate is not zero since society is still interested in the production of Q2 amounts of goods from the firm in order to ensure the society continues to benefit.
As long as the cost of pollution is lower than the benefits accrued the society would be comfortable allowing a certain amount of pollution (Latin, 2005). As such the government would have to come in to ensure that the costs of pollution are below the benefit accrued to the society. This may be done through restricting licenses or through taxes intended to raise the producer marginal cost curve to the social marginal cost curve. (II)While from the public’ s perspective it is desirable to have zero pollution, the economic perspective would not allow for zero pollution if optimality is to be maintained.
A lot of literature on pollution and in some instances scientific literature has advocated for the elimination of pollution. According to the diagram above, a purely scientific or sociological prescription for pollution would not work economically.
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