5.5 Two types of consumers (workers and retirees) share a community with a polluting cheese factory. The pollution is nonrival and nonexcludable. The total damage to workers is p² where p is the amount of pollution and the total damage to retirees is 3p². According to an analysis by consulting engineers, the cheese factory saves 20p p² by polluting p. a. Find the aggregate marginal damage for the public bad. - b. Graph the marginal savings and aggregate marginal damage curves with pollution on the horizontal axis. c. How much will the cheese factory pollute in the absence of any regulation or bargaining? What is this society's optimal level of pollution? d. Starting from the uncontrolled level of pollution calculated in part (c), find the marginal willingness to pay for pollution abatement, A, for each consumer class. (Abatement is re- duction is pollution; zero abatement would be associated with the uncontrolled level of pollution.) Find the aggregate marginal willingness to pay for abatement. e. Again starting from the uncontrolled level of pollution, what is the firm's marginal cost of pollution abatement? What is the optimal level of A? f. Are the problems of optimal provision of the public bad (pollution) and the public good (abatement) equivalent? Explain why or why not.
5.5 Two types of consumers (workers and retirees) share a community with a polluting cheese factory. The pollution is nonrival and nonexcludable. The total damage to workers is p² where p is the amount of pollution and the total damage to retirees is 3p². According to an analysis by consulting engineers, the cheese factory saves 20p p² by polluting p. a. Find the aggregate marginal damage for the public bad. - b. Graph the marginal savings and aggregate marginal damage curves with pollution on the horizontal axis. c. How much will the cheese factory pollute in the absence of any regulation or bargaining? What is this society's optimal level of pollution? d. Starting from the uncontrolled level of pollution calculated in part (c), find the marginal willingness to pay for pollution abatement, A, for each consumer class. (Abatement is re- duction is pollution; zero abatement would be associated with the uncontrolled level of pollution.) Find the aggregate marginal willingness to pay for abatement. e. Again starting from the uncontrolled level of pollution, what is the firm's marginal cost of pollution abatement? What is the optimal level of A? f. Are the problems of optimal provision of the public bad (pollution) and the public good (abatement) equivalent? Explain why or why not.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:5.5 Two types of consumers (workers and retirees) share a community with a polluting
cheese factory. The pollution is nonrival and nonexcludable. The total damage to workers
is p² where p is the amount of pollution and the total damage to retirees is 3p². According
to an analysis by consulting engineers, the cheese factory saves 20p p² by polluting p.
a. Find the aggregate marginal damage for the public bad.
-
b. Graph the marginal savings and aggregate marginal damage curves with pollution on the
horizontal axis.
c. How much will the cheese factory pollute in the absence of any regulation or bargaining?
What is this society's optimal level of pollution?
d. Starting from the uncontrolled level of pollution calculated in part (c), find the marginal
willingness to pay for pollution abatement, A, for each consumer class. (Abatement is re-
duction is pollution; zero abatement would be associated with the uncontrolled level of
pollution.) Find the aggregate marginal willingness to pay for abatement.
e. Again starting from the uncontrolled level of pollution, what is the firm's marginal cost
of pollution abatement? What is the optimal level of A?
f. Are the problems of optimal provision of the public bad (pollution) and the public good
(abatement) equivalent? Explain why or why not.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 1 images
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education