Question

The U.S. government recently announced a new rule for automobile fuel efficiency standards. The new rule would allow cars on American roads to emit more carbon dioxide than previously allowed. What might be a benefit of such a rule? What would be a drawback? Do you support the new rule, and why or why not? Use what you learned from the welfare theorems to make your argument.

Answer 1

If US government allows cars on the road to emit more pollution than previously allowed, then the car making companies might start using an engine in the car which is not efficient enough in controlling emission. This will reduce the cost of production of a car. It might lead to increase in the demand of the cars also.

The drawback of this rule is that more emission of carbon dioxide in the environment will lead to increase in the pollution level. This will result as a negative externality which will harm the people of the society.

This rule should definitely not be supported because it will result in more harm than it would benefit the economy. Pollution levels will go very high which the people of US would have to bear.