3. There are two firms that emit pollutant SO2. Assume the pollution abatement technology of the two firms can be represented by MAC functions: MACA = 240 – 6E and MACB = 160 - 4E. Currently there is no pollution control. Now the local government wants the total pollution to be reduced by 50%. Suppose the government knows the pollution abatement technology of the two firms, and an emission standard policy is in order. To minimize the total cost of pollution abatement, how should the government set the quantity of SO2 that Firm A is allowed to emit? How many tons should the government allow Firm B to emit? What is the total abatement cost of the two firms? Draw a graph to illustrate your answer.

3. There are two firms that emit pollutant SO2. Assume the pollution abatement technology of the two firms can be represented by MAC functions: MACA = 240 – 6E and MACB = 160 - 4E. Currently there is no pollution control. Now the local government wants the total pollution to be reduced by 50%. Suppose the government knows the pollution abatement technology of the two firms, and an emission standard policy is in order. To minimize the total cost of pollution abatement, how should the government set the quantity of SO2 that Firm A is allowed to emit? How many tons should the government allow Firm B to emit? What is the total abatement cost of the two firms? Draw a graph to illustrate your answer.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Springfield is a small town with a total civilian population of 800. Of this population, 125 are under the age of 16. Of the population 16 and over, there are 350 working full-time and another 50 working part-time. Of the remaining adult population, 30 people recently quit their jobs in order to look for better employment. Finally, there are 40 full-time students (not working), 180 retired and another 25 stay-at-home spouses.
a) For each, find the expressions for marginal utilities and the marginal rate of substitution, and determine whether monotonicity and convexity are met.
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