Behavioral Economics

Read Chapter 12 of Nudge then answer the following 9 questions.
Questions Chapter 12

1. Why do many libertarians agree that in the presence of externalities, markets do not lead to the optimal outcome?

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2. What are two problems associate with markets that lead to environmental problems?

3. How does the United States currently deal with the problem of pollution?

4. What are two main incentives that economists believe can reduce pollution?

5. Why are imposing taxes often the best approach to reducing pollution?

6. What are the benefits of “cap and trade”?

7. Provide two examples from the chapter of how feedback helped act as a nudge.

8. What improvements do the authors suggest for the Fuel Economy Stickers? Explain.

9. A goal of the EPA is to convince companies that lowering energy use can increase profits for the company. Why are Econs skeptical that this is necessary. Why do Humans believe otherwise?

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