2. Two power producers emit sulfur dioxide (S02). Axion earns a profit of 10 + 20xA -xỉ when it emits XA tons of SO2, and Boson earns a profit of 8 + 40xB -x when it emits xB tons. (i) How much SO2 will the two producers emit? (ii) Suppose that a regulator imposes a binding limit on aggregate emissions. Specifically, emissions must satisfy x4 + XB < x*. Find the Pareto efficient emissions levels for each producer, given the limit on aggregate emissions. (iii) Now suppose that the regulator gives each producer -x* (divisible) emissions permits, each of which permits the holder to emit one ton of SO2. Find a profitable trade (quantity and price per permit) for the producers.

2. Two power producers emit sulfur dioxide (S02). Axion earns a profit of 10 + 20xA -xỉ when it emits XA tons of SO2, and Boson earns a profit of 8 + 40xB -x when it emits xB tons. (i) How much SO2 will the two producers emit? (ii) Suppose that a regulator imposes a binding limit on aggregate emissions. Specifically, emissions must satisfy x4 + XB < x. Find the Pareto efficient emissions levels for each producer, given the limit on aggregate emissions. (iii) Now suppose that the regulator gives each producer -x (divisible) emissions permits, each of which permits the holder to emit one ton of SO2. Find a profitable trade (quantity and price per permit) for the producers.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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