Analyzing Policy Implementation Failure
A city government has access to precise data showing that a local factory's pollution causes $5 million in health damages annually. Economists have calculated that a tax of $100 per ton of emissions would perfectly internalize this externality. However, the city council, facing pressure from the factory which is a major employer, decides to set the tax at only $20 per ton. Which prerequisite for effective government intervention is most clearly lacking in this scenario? Explain your reasoning.
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Economics
Economy
Introduction to Microeconomics Course
CORE Econ
Social Science
Empirical Science
Science
Analysis in Bloom's Taxonomy
Cognitive Psychology
Psychology
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Analyzing Policy Implementation Failure
A government's decision to implement a per-unit tax on a polluting firm is sufficient to guarantee a reduction in the externality to the socially optimal level, provided the firm complies with the tax.
A government attempts to correct a market failure caused by a negative externality, but the policy does not achieve the socially optimal outcome. Match each scenario of policy failure with the most likely prerequisite that was not met.
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Analyzing Policy Failure Due to Political Factors
A government passes a law to limit pollution from a factory that is damaging a local ecosystem. The pollution limit is based on precise scientific data that accurately calculates the social cost of the pollution. The policy has widespread public and political support. Despite these favorable conditions, monitoring a year later shows that the pollution levels have not decreased. Which of the following is the most likely reason for the policy's failure to achieve its goal?
A government, equipped with precise data on the social costs of industrial pollution and a highly competent enforcement agency, enacts a pollution tax. However, the final tax rate is set far below the level required to achieve the socially optimal outcome, following a period of intense lobbying by the industry affected. This policy's failure to correct the market failure is primarily due to a lack of:
A government's decision to implement a per-unit tax on a polluting firm is sufficient to guarantee a reduction in the externality to the socially optimal level, provided the firm complies with the tax.