Suppose Russia can produce automobiles relatively cheaply, but they have poor gas mileage and create a great deal of air pollution. The U.S. government, concerned about the quality of air, would like to see fewer Russian automobiles and more cleaner-running American automobiles on the road.
a.What is the nature of the market failure that would justify the U.S.government taking some action against the importation of Russian automobiles?
b.Explain why imposing a tariff is a second best policy to employ in this case and what policy choice would be more efficient.

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The Answer of Suppose Russia can produce automobiles relatively cheaply, but they have poor gas mileage and create a great deal of air pollution. The U.S. government, concerned about the quality of air, would like to see fewer Russian automobiles and more cleaner-running American automobiles on the road.
a.What is the nature of the market failure that would justify the U.S.government taking some action against the importation of Russian automobiles?
b.Explain why imposing a tariff is a second best policy to employ in this case and what policy choice would be more efficient.

Suppose Russia Can Produce Automobiles Relatively Cheaply, but They Have