Coal-fired electric generating facilities supply kilowatt hours (kwh) of energy according to the following formula: Qs = 50 + P. Generating kwh via burning coal creates an externality. In this case, the externality is what is known as a "threshold" pollutant, meaning that below some level, emission cause no detectable harm, but harm increases with increasing emissions once the threshold is reached. The marginal damage function for these emissions is given as MD = -150 +3 Qs, where Qs is the quantity of kwh produced by burning coal. Given that the social marginal cost function (SMC) is a linear function of the form SMC = a +bQs,

Coal-fired electric generating facilities supply kilowatt hours (kwh) of energy according to the following formula: Qs = 50 + P. Generating kwh via burning coal creates an externality. In this case, the externality is what is known as a "threshold" pollutant, meaning that below some level, emission cause no detectable harm, but harm increases with increasing emissions once the threshold is reached. The marginal damage function for these emissions is given as MD = -150 +3 Qs, where Qs is the quantity of kwh produced by burning coal. Given that the social marginal cost function (SMC) is a linear function of the form SMC = a +bQs,

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider regions A and B. In region A, the marginal benefit associated with pollution cleanup is MB = 300 – 10Q, while in region B, the marginal benefit associated with pollution cleanup is MB = 200 – 4Q. Suppose that the marginal cost of cleanup is constant at $12 per What is the optimal level of pollution cleanup in each of the two regions?
Firms in a polluting industry can be classified in two groups: newer firms with a cleaner technology that can abate pollution at a lower marginal cost MCLA = (1/2)aL and older firms with dirtier MCHA = aH, where ai is the level of abatement undertaken by firms of type i = L, H. The social marginal benefit of abating pollution from this particular industry is MBA= 120 - A, where A is the aggregate level of abatement in that industry. To design an efficient emissions standard, the government needs to determine which is the efficient abatement allocation (aL, aH). In order to do this, obtain a cost effective abatement allocation (aL, aH)that provides an aggregate abatement level A = aL + aH, and then proceed to determine the efficient level A (Hint: You should obtain that MCA = A=3)
Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC_1 = 12-.5E_1 MAC_2 = 12-E_2, and assume marginal external damages (MED) from the aggregate emissions of both firms (E_Agg = E_1 + E_2) is: MED = (1/3)E_Agg. To achieve the socially efficient level of aggregate emissions (E*_Agg), the government institutes a per unit tax on emissions. The per- unit tax on emissions is $ Answer:
The supply of fertilizer is described by the following equation: Qs= 3,000P where Qs is the supply per year and P is the price of fertilizer per ton. The demand for fertilizer is described by: Qd= 500,000 − 20,000P where Qd is tons of fertilizer demanded per year. The marginal external costs of $30 are associated with the production of each ton of fertilizer due to the pollution related to fertilizer production. explain your answers by showing your work. a) Assuming that fertilizer is sold in a competitive market, what is the market price?
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Consider an industry with two firms that emit a uniformly mixed air pollutant (e.g., carbon dioxide). The marginal abatement cost functions for Firm 1 and Firm 2 are: MAC1 = 100 - e1 MAC2 = 100 - 4e2 Aggregate emissions for the industry are denoted as E = e1 + e2. [1] In an unregulated environment how many units of emissions does each firm emit? Firm 1’s unregulated level of emissions ____________ Firm 2’s unregulated level of emissions ____________ Total unregulated level of emissions ______________
Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC_1 = 22 - 2E_1 MAC_2 = 10 - E_2, and assume marginal external damages (MED) from the aggregate emissions of both firms (E_Agg = E_1 + E_2) is: MED = .5E_Agg. To achieve the socially efficient level of aggregate emissions (E*_Agg), the government institutes a cap and trade policy and sets the cap equal to the socially efficient level of emissions (E*_Agg). If firm 2 is initially grandfathered 2 permits, it will buy ____ more permits. (Note: your answer can be positive or negative; if it is positive, the firm is buying additional permits; if it is negative, the firm sells permits. So, for example, an answer of -10 implies that the firm sells 10 permits)
MAC_1 = 11 - 2E 1 MAC 2 = 8.5 E_2, and assume marginal external damages ( MED) from the aggregate emissions of both firms (E_Agg E_1 + E_2) is: MED = .5 E_Agg. To achieve the socially efficient level of aggregate emissions (E*_Agg), the government institutes a per- unit tax on emissions. With this tax, the total amount of tax revenue raised is $ =
Suppose there are only two polluting firms, called A and B, with the following marginal abatement costs: MACA=160 2- e and MACB=100-es, where e represents firm A's emissions in tons and ea represents firm B's emissions in tons. Suppose the government wishes to ensure that the two firms together emit 60 tons of the pollutant and uses a Tradable Emission Permit (TEP) policy. Assume that each TEP allows its holder to emit 1 ton, and that the market for permits is perfectly competitive. a. Suppose the government initially distributes the total number of TEPs it issues equally between the two firms. The permits are distributed free of charge. Once trade in permits takes place, what will be the equilibrium in the market for TEPS (i.e. which firm will buy how many TEPs from the other, and at what price)? b. Briefly describe three problems of setting up a TEP market.
Firms in a polluting industry can be classified in two groups: newer firms with a cleaner technology that can abate pollution at a lower marginal cost MCLA = (1/2)aL and older firms with dirtier MCHA = aH, where ai is the level of abatement undertaken by firms of type i = L, H. The social marginal benefit of abating pollution from this particular industry is MBA= 120 - A, where A is the aggregate level of abatement in that industry. What Pigouvian tax t will implement the efficient allocation (aL, aH)? Is the resulting allocation an efficient allocation? What is the government's tax revenue?
Three neighboring towns – Marshland, Dampland, and Wetland – all border the same lake. The lake frequently floods causing damage to property in all three towns. Each town would benefit from flood mitigation, but the level of benefits differs. With Z representing the level of mitigation: for Marshland, MB = 3 – Z for Dampland, MB = 4 – 2Z for Wetland, MB = 11- Z The marginal cost of flood mitigation is MC = 2 + 12Z Questions: ***Please Note*** Previous Expert Calculated: Z = 16/3 as the Solution to (a) Math Solver Calculates: Z = 1 ***Please Resolve*** (a) What is the socially optimal level of Z? (b) What would each individual town be willing to pay for this level of flood mitigation? (c) The representative from Wetland proposes that each town pay an equal share for the optimal level of flood mitigation. Would…
Aside from greenhouse gas emissions [e.g., carbon dioxide (CO2)], vehicles emit pollutants such as nitrogen oxides (NOx), which contribute to the formation of ozone and acid rain, and carbon monoxide (CO), the ingestion of which reduces the flow of oxygen in the bloodstream and is particularly dangerous to persons with heart disease. Assume that the following equation describes these marginal external costs: EMC= 0.125Q Inverse Demand Function: MB = 180,000–QdMarginal Cost Function:MC = 0.25 Qs c.What is the social marginal cost function (SMC)? Graph this function along with the private marginal cost (label this PMC) and marginal benefit functions. d.Determine the socially efficient equilibrium price and quantity and denote them by Psocand Qsoc. Show your answer both graphically and mathematically. e.What is total surplus at this social optimum (Ps, Qs)? Calculate totalsurplus numerically as well as indicate the area on the graph that corresponds with totalsurplus.…