hot topic: market failure

Question 1

what is carbon tax and its impact

Answer 1

• taxing on amount of fossil fuels burnt
• increases the cost of production of carbon-intesive goods
• reducing demand

Question 2

what are the cons against carbon tax(2)

Answer 2

• cost of implementing regulations in order to track carbon emissions
• “leakage effect”- business relocate to other countries

Question 3

what are the pros for carbon tax(2)

Answer 3

• reduced social costs of carbon(diseases, increases green companies)
• revenue can be used to subsidise businesses to move to green/ businesses with positive production externalities

Question 4

what is fracking

Answer 4

• where natural rsources
• such as oil and gas
• are extracted by applying pressure to rocks underground

Question 5

what are the pros for fracking

Answer 5

• job creation
• decreased cost of production(due to increased availability of raw materials)
• improved infrastructure in the area

Question 6

what are the cons to fracking

Answer 6

• reduced availability of farm land/ land for manufacturing
• damage to environment(release of methane)
• large consumption of water

Question 7

what is a good point to make about fracking and its evaluation

Answer 7

POINT
- businesses can relocate close to fracking sites which can lead to external economies of scale
EV
- environmental damage(can lead to earthquakes) can result in costs to businesses which can have an impact of consumer surplus