3. You work for the state environmental office and have been told that you are now in charge of determining the optimal amount of pollution allowed from power plants in the area. You recognize that emissions from this powerplant cause damage to the environment, but that it is also costly to reduce the number of emissions due to reduced production of the plant. After doing some research you find that the Marginal Damage Cost (MDC) and Marginal Abatement Cost (MAC) can be represented by the following equations: MDC = 8e and MAC = 240-4e. A. Graph the MAC and MDC curves on a single graph. What is the maximum level of unregulated or uncontrolled pollution for the firm? What is the total cost of pollution when the market is unregulated and the firm produces an uncontrolled amount of emissions? B. What is the optimal amount of pollution emitted by this firm? What are the total abatement costs, total damage costs, and total pollution costs associated with the optimal level of pollution? C. A local environmental group is currently holding a protest where they are declaring any level of emissions as inherently wrong and that any form of pollution is an evil afront to the environment. According to them, the only right thing to do is reduce emissions down to zero. It is part of your job to reason with the protesters as to why the optimal level of emissions you calculated in part B should be followed. For your argument, calculate the Total Pollution Cost when emissions are zero and compare that to the Total Pollution Costs at the optimal level of emissions for part B. What would you tell the protesters? D. Advances in solar panel technology have drastically reduced the cost of abating emissions. This technological advance will decrease marginal abatement costs by $60. Either draw a new graph or draw a new MAC curve on your graph for part A to demonstrate this change. What is the new optimal level of pollution given these enforcement costs? Find the total cost of pollution at this new optimal level and explain why it has changed.
3. You work for the state environmental office and have been told that you are now in charge of determining the optimal amount of pollution allowed from power plants in the area. You recognize that emissions from this powerplant cause damage to the environment, but that it is also costly to reduce the number of emissions due to reduced production of the plant. After doing some research you find that the Marginal Damage Cost (MDC) and Marginal Abatement Cost (MAC) can be represented by the following equations: MDC = 8e and MAC = 240-4e. A. Graph the MAC and MDC curves on a single graph. What is the maximum level of unregulated or uncontrolled pollution for the firm? What is the total cost of pollution when the market is unregulated and the firm produces an uncontrolled amount of emissions? B. What is the optimal amount of pollution emitted by this firm? What are the total abatement costs, total damage costs, and total pollution costs associated with the optimal level of pollution? C. A local environmental group is currently holding a protest where they are declaring any level of emissions as inherently wrong and that any form of pollution is an evil afront to the environment. According to them, the only right thing to do is reduce emissions down to zero. It is part of your job to reason with the protesters as to why the optimal level of emissions you calculated in part B should be followed. For your argument, calculate the Total Pollution Cost when emissions are zero and compare that to the Total Pollution Costs at the optimal level of emissions for part B. What would you tell the protesters? D. Advances in solar panel technology have drastically reduced the cost of abating emissions. This technological advance will decrease marginal abatement costs by $60. Either draw a new graph or draw a new MAC curve on your graph for part A to demonstrate this change. What is the new optimal level of pollution given these enforcement costs? Find the total cost of pollution at this new optimal level and explain why it has changed.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
questions 3a and 3b
Transcribed Image Text:3. You work for the state environmental office and have been told that you are now in charge of
determining the optimal amount of pollution allowed from power plants in the area. You
recognize that emissions from this powerplant cause damage to the environment, but that it
is also costly to reduce the number of emissions due to reduced production of the plant. After
doing some research you find that the Marginal Damage Cost (MDC) and Marginal
Abatement Cost (MAC) can be represented by the following equations: MDC = 8e and
MAC = 240 - 4e.
A. Graph the MAC and MDC curves on a single graph. What is the maximum level of
unregulated or uncontrolled pollution for the firm? What is the total cost of pollution when
the market is unregulated and the firm produces an uncontrolled amount of emissions?
B. What is the optimal amount of pollution emitted by this firm? What are the total
abatement costs, total damage costs, and total pollution costs associated with the optimal
level of pollution?
C. A local environmental group is currently holding a protest where they are declaring any
level of emissions as inherently wrong and that any form of pollution is an evil afront to the
environment. According to them, the only right thing to do is reduce emissions down to zero.
It is part of your job to reason with the protesters as to why the optimal level of emissions
you calculated in part B should be followed. For your argument, calculate the Total
Pollution Cost when emissions are zero and compare that to the Total Pollution Costs at the
optimal level of emissions for part B. What would you tell the protesters?
D. Advances in solar panel technology have drastically reduced the cost of abating
emissions. This technological advance will decrease marginal abatement costs by $60. Either
draw a new graph or draw a new MAC curve on your graph for part A to demonstrate this
change. What is the new optimal level of pollution given these enforcement costs? Find the
total cost of pollution at this new optimal level and explain why it has changed.
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