A plant with a marginal abatement function described by MAC = 75-5E is polluting the town's water supply. Emissions are measured in tons per year. a) Government regulators propose that the company pay a tax equal to $30 per ton of emissions. How many tons will the firm abate when faced with this tax, and how much better off will it be compared to if it does no abating. b) Suppose that, instead of the tax, the government offers to pay the firm $30 for each ton of emissions it abates. How many tons will the firm abate, and how much better off will it be compared to if it does no abating? A c) If damages caused by the firm's emissions is described by the function MD = 5E, what tax rate would encourage the firm to abate to the socially efficient level of emissions? Compute the private and social compliance cost and the net benefit accruing to society from the socially efficient emissions tax.

A plant with a marginal abatement function described by MAC = 75-5E is polluting the town's water supply. Emissions are measured in tons per year. a) Government regulators propose that the company pay a tax equal to $30 per ton of emissions. How many tons will the firm abate when faced with this tax, and how much better off will it be compared to if it does no abating. b) Suppose that, instead of the tax, the government offers to pay the firm $30 for each ton of emissions it abates. How many tons will the firm abate, and how much better off will it be compared to if it does no abating? A c) If damages caused by the firm's emissions is described by the function MD = 5E, what tax rate would encourage the firm to abate to the socially efficient level of emissions? Compute the private and social compliance cost and the net benefit accruing to society from the socially efficient emissions tax.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A plant with a marginal abatement function described by MAC = 75-5E is polluting the
town's water supply. Emissions are measured in tons per year.
a) Government regulators propose that the company pay a tax equal to $30 per ton
of emissions. How many tons will the firm abate when faced with this tax, and
how much better off will it be compared to if it does no abating.
b) Suppose that, instead of the tax, the government offers to pay the firm $30 for
each ton of emissions it abates. How many tons will the firm abate, and how much
better off will it be compared to if it does no abating?
c) If damages caused by the firm's emissions is described by the function MD = 5E,
what tax rate would encourage the firm to abate to the socially efficient level of
emissions? Compute the private and social compliance cost and the net benefit
accruing to society from the socially efficient emissions tax.
%3D

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