hree firms in a single industry are the only source, in a given airshed, of emissions of uniformly mixed pollutant, say, CO₂. Their emissions levels are currently e₁ = 300, 2 = 200, and e3 = 100, where the subscript denotes firms. The environmental regulator as decided that emissions should be reduced by half, to E=300. The firms' abatement ost functions are given by C₁(a₁) = 0.1a, C₂(a₂) = 0.2a2, and C3 (a3) = 0.3a3 espectively. (It is assumed that these functions describe the firms' entire cost structure, ncluding the cost of producing the optimal level of output given e.) Enforcement costs re zero and there is no uncertainty.
hree firms in a single industry are the only source, in a given airshed, of emissions of uniformly mixed pollutant, say, CO₂. Their emissions levels are currently e₁ = 300, 2 = 200, and e3 = 100, where the subscript denotes firms. The environmental regulator as decided that emissions should be reduced by half, to E=300. The firms' abatement ost functions are given by C₁(a₁) = 0.1a, C₂(a₂) = 0.2a2, and C3 (a3) = 0.3a3 espectively. (It is assumed that these functions describe the firms' entire cost structure, ncluding the cost of producing the optimal level of output given e.) Enforcement costs re zero and there is no uncertainty.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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suppose the regulator imposes a Pigouvian tax on each unit of emissions. Calculate each firm's emissions level and the total tax collected.
Transcribed Image Text:Three firms in a single industry are the only source, in a given airshed, of emissions of
a uniformly mixed pollutant, say, CO₂. Their emissions levels are currently e₁ = 300,
e₂: = 200, and e3 = 100, where the subscript denotes firms. The environmental regulator
has decided that emissions should be reduced by half, to E=300. The firms' abatement
cost functions are given by C₁ (a₁) = 0.1a1, C₂(a₂) = 0.2a2, and C3 (a3) = 0.3a3
respectively. (It is assumed that these functions describe the firms' entire cost structure,
including the cost of producing the optimal level of output given e.) Enforcement costs
are zero and there is no uncertainty.
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a1 = (E1/0.1) = (150/0.1) = 45.8. is not make sense. How come?
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