California decides to regulate carbon emissions and calculates the marginal cost of abatement and marginal benefit of abatement as follows:
MCA = 30 + Q, MBA = 150 – 3Q.
(a) (6 points) If California wants to maximize welfare by setting a tax, what tax should it set?
(b) (4 points) An alternative to the “market-based” tax in part (a), is command-and-control regulation. Briefly explain the drawback(s) of a “command-and-control” approach relative to the tax in part (a)?
(c) (4 points) Suppose carbon emissions have impacts outside of California but California only takes into account the impacts inside California. If California were to take into account all the impacts, explain whether the MCA or MBA curves would shift inwards or outwards and whether the tax in part (a) would be too high or too low relative to the welfare-maximizing tax.
(d) (8 points) Suppose California misses the optimal tax in part (a) and sets a tax of t = 70. How much abatement will occur? What will be the deadweight loss?
Sample Solution
ehaviours such as providing feedback, acknowledging or not performance, and praising work that is better than the average (Podsakoff, MacKenzie, Moorman, & Fetter, 1990). For data regarding transformational leadership, 12 items of the same scale were used. The items addressed behaviours like role modelling, encouraging teamwork, and openness to new opportunities (Podsakoff, MacKenzie, Moorman, & Fetter, 1990). Information on LMX were collected by using 7 items of Graen & Uhl-Bien’s (1995) instrument. The items were aimed at dimensions of leader’s relationship with members (Graen & Uhl-Bien, 1995). Data on psychological safety were collected using items from Edmonson’s (1999) instrument; items targeted behaviours related to team climate (Edmonson A., 1999). Respondents’ background consisted in items on gender, age, education, leadership position, number of team members (if applicable), specialisation (if applicable), years of working experience, and years of experience within organisation. The questionnaire was distributed online. After completing the questionnaire, team leaders provided a list with their team members; the latter were randomly selected and further contacted by the researchers. The questionnaire was designed and applied in Dutch; for the current study the questionnaire was back translated. Independent & dependent variables The study aims to test the relationship between transformational – respectively transactional – leadership, LMX, and psychological safety, proposing that LMX mediates the relationship between leadership style and psychological safety. Therefore transformational, respectively transactional, leadership are the independent variables of the study; LMX is the mediator; and psychological safety is the dependent variable. Respondents’ demographics will be used as control variables. Plan for data analysis Data will be analysed using SPSS analysis software. Descriptive analysis will be performed for exploring the characteristics of the study population. Even though psychological safety is a notion that lies mostly in the individual perception, it is best observed at team level (Edmonson, 2004). The study dataset contains data collected from team leaders and team members. Given the data clustering (as shown by table), multilevel regression analyses will be performed. Level Operational (N) Regression Respondent 2 team leader 90 1 healthcare professionals 514 Prior to performing the regression analyses, data will be tested for ensuring>
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