6. Consider an industry with three firms. Firm 1's marginal cost of abatement (MCA)=10-E₁, where E is the tons of pollution emitted. Firm 2's MCA-30-2E₂. Firm 3's MCA=30-E3. Please draw a diagram to support your answers to the following questions. a. If there is no policy to reduce pollution, how much pollution will be emitted by each firm? What will be total pollution? Hint: if there is no policy to reduce pollution, the price to pollute is zero. b. If the government imposes a tax of $10/ton, how much pollution will be emitted by each firm? How much pollution will be emitted in total? c. What will be the total cost of abatement? d. If the government imposes a limit on pollution, where the limit is the total amount of pollution you found in part b, and each firm is allowed to pollute an equal amount (i.e., each firm will be allowed to emit one third of the total amount allowed), what will be the total cost of abatement? Which policy is more efficient, the tax or the limit on pollution? Explain. e.

6. Consider an industry with three firms. Firm 1's marginal cost of abatement (MCA)=10-E₁, where E is the tons of pollution emitted. Firm 2's MCA-30-2E₂. Firm 3's MCA=30-E3. Please draw a diagram to support your answers to the following questions. a. If there is no policy to reduce pollution, how much pollution will be emitted by each firm? What will be total pollution? Hint: if there is no policy to reduce pollution, the price to pollute is zero. b. If the government imposes a tax of $10/ton, how much pollution will be emitted by each firm? How much pollution will be emitted in total? c. What will be the total cost of abatement? d. If the government imposes a limit on pollution, where the limit is the total amount of pollution you found in part b, and each firm is allowed to pollute an equal amount (i.e., each firm will be allowed to emit one third of the total amount allowed), what will be the total cost of abatement? Which policy is more efficient, the tax or the limit on pollution? Explain. e.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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