#### 8) True/false: Ex ante (meaning before we know which MB is correct), the town should prefer a tax because marginal cost is relatively steep compared to marginal benefits

Subject:EconomicsPrice: Bought3

# 8) True/false: Ex ante (meaning before we know which MB is correct), the town should prefer a tax because marginal cost is relatively steep compared to marginal benefits. Explain brie?y. (* 1 point)9) True/false: Suppose that it turns out that the true MB was 20. In that case, the town will wish it had chosen a tax, rather than a quantity regulation. Explain briefly. (* 1 point)Now consider a new scenario. Suppose the town knows the marginal bene?t of abatement is equal to 40 — 2g. But, the town is unsure about the MC. There is a 1/3 chance that the marginal cost is a constant 7 + q, and there is a 2/3 chance that the marginal cost is 19 + q.10) If the town uses a price instrument (i.e., offers the water ?ltration company a subsidy per unit of abatement ), what price should it set? (1 point)11) If the town uses a quantity instrument (i.e., mandates a given quantity of abatement and then pays the firm its true cost), what quantity of abatement should it choose? (1 point)12) True/false: Ex ante (meaning before we know which MC is correct), the town should prefer a quantity regulation because marginal bene?t is relatively steep compared to marginal cost. Explain brie?y. (* 1 point)13) Draw (and upload) a graph that shows the deadweight loss that results from uncer- tainty under a quantity policy and includes the two possible marginal cost functions and the marginal benefit function. (* 1 point)14) In our class examples, the two deadweight loss triangles that are associated with a given policy (e.g., a tax policy) were the same size. Are your triangles the same size in each graph? Explain why or why not brie?y. (* 1 point) 