Suppose a municipality votes to reduce the combined pollution introduced by three local companies. Presently, each firm crethe area, for a total of 12 pollution units. The government can reduce total pollution in the area to 6 units by choosing between the following twomethods:Methods to Reduce Pollution1. The government imposes pollution standards using regulation.2. The government issues tradable pollution permits.The costs faced by each firm are different, so it is more difficult for some firms to reduce pollution than others. The following table shows the costfaced by each firm to eliminate each unit of pollution. Assume that the cost of eliminating all 4 units of pollution (that is, reducing pollution to zero) isprohibitively expensive for all three firms.FirmFirm AFirm BFirm CFirst Unit of Pollution(Dollars)5565090Method 1: RegulationCost of Eliminating the...Second Unit of Pollution(Dollars)70800125Third Unit of Pollution(Dollars)1101,500180Next, suppose that two government officials proposed alternative plans that would reduce pollution by 6 units.The first government employee suggests reducing pollution through regulation. To meet the pollution goal, the government requires each firm toreduce its pollution by 2 units. Complete the following table with the action each firm will take at this permit price, the amount of pollution each firm will eliminate, and the amount itcosts each firm to reduce pollution to the necessary level. If a firm is willing to buy two permits, assume that it buys one permit from each of theother firms. (Hint: Do not include the prices paid for permits in the cost of reducing pollution.)FirmFirm AFirm BFirm CInitial Pollution PermitAllocation(Units of pollution)222Regulation Versus Tradable PermitsProposed MethodRegulationDetermine the total cost of eliminating six units of pollution using both methods, and enter the amounts in the following table. (Hint: You might needto get information from previous tasks to complete this table.)Total Cost of Eliminating Six Units of Pollution(Dollars)ActionTradable PermitsCost of PollutionReduction(Dollars)In this case, you can conclude that eliminating pollution iscostly to society when the government regulates each firm to eliminate acertain amount of pollution than when it allocates pollution permits that can be bought and sold.

In economics, we make the assumption that any transaction involving two people must be true or it…

Complete the following table with the action each firm will take at this permit price, the amount of pollution each firm will eliminate, and the amount it costs each firm to reduce pollution to the necessary level. If a firm is willing to buy two permits, assume that it buys one permit from each of the other firms. (Hint: Do not include the prices paid for permits in the cost of reducing polluon.) Firm Firm A Firm B Firm C Initial Pollution Permit Allocation (Units of pollution) 2 2 2 Regulation Versus Tradable Permits Proposed Method Regulation ine the total cost of eliminating six units ollution sing both methods, and enter the amounts in the following table. (Hint: You might need to get information from previous tasks to complete this table.) Total Cost of Eliminating Six Units of Pollution (Dollars) Action Tradable Permits Cost of Pollution Reduction (Dollars) In this case, you can conclude that eliminating pollution is certain amount of pollution than when it allocates pollution permits that can be bought and sold. costly to society when the government regulates each firm to eliminate a

Complete the following table with the action each firm will take at this permit price, the amount of pollution each firm will eliminate, and the amount it costs each firm to reduce pollution to the necessary level. If a firm is willing to buy two permits, assume that it buys one permit from each of the other firms. (Hint: Do not include the prices paid for permits in the cost of reducing polluon.) Firm Firm A Firm B Firm C Initial Pollution Permit Allocation (Units of pollution) 2 2 2 Regulation Versus Tradable Permits Proposed Method Regulation ine the total cost of eliminating six units ollution sing both methods, and enter the amounts in the following table. (Hint: You might need to get information from previous tasks to complete this table.) Total Cost of Eliminating Six Units of Pollution (Dollars) Action Tradable Permits Cost of Pollution Reduction (Dollars) In this case, you can conclude that eliminating pollution is certain amount of pollution than when it allocates pollution permits that can be bought and sold. costly to society when the government regulates each firm to eliminate a

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

3. Suppose the EPA wants to reduce pollution to the socially optimal level. Based on the data in the table below, what is the optimal level of pollution? Total cleanup Total Total (tons) Benefit Cost 50 2 85 18 3 115 28 4 140 39 5 160 51 179 63 7 197 76 8 214 90 230 105 10 245 120 11 259 137 12 273 156 13 286 177 14 299 200 15 311 225
Which of the following statements about pollution taxes, cap and trade, or command-and-control standards is FALSE? a.) Pollution taxes strictly control the amount of pollution but leave marginal abatement costs to be determined by the market. Cap-and-trade programs strictly control marginal abatement costs but leave the actual amount of pollution to be determined by the overall level of economic activity. b.) Pollution taxes are unpopular in the U.S. because American companies tend to dislike taxes in general. However, pollution taxes offer firms some greater certainty about how large will be their marginal cost of abatement on the last unit of abatement they will need to do, if they are to minimize the costs they incur both for cleanup and for pollution taxes. c.) Both command-and-control pollution standards, and cap-and-trade programs, can effectively limit the total amount of pollution, but command and control will be least-cost only by accident. Usually,…
ЕOC 11.04 Consider two car factories, one run by Ford and the other run by Honda, that both create pollution. The government wants to reduce how much these two factories pollute by 40 tons, so only allow factories to pollute if they have a permit. Each factory is given 20 pollution permits. A business can use a permit to emit one ton of pollution or they can sell it to another business (and lose the ability to pollute). To lower pollution it costs Ford $200 per ton of pollutant removed and it costs Honda $100 per ton removed. After Ford and Honda have met to trade their permits with each other, what we expect to happen? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. Honda emits 20 tons of pollutants and Ford emits 20 tons of pollutants. a Honda no longer pollutes and Ford does not lower how much it produces. Honda increases its pollution and Ford lowers its pollution. Ford no longer pollutes and Honda does not lower how much it…
Consider a firm that emits pollution into the air. Suppose that the marginal damage costs associated with the emissions are given by MDC -15+ 4 c, where e is the quantity of the emissions. The firm's marginal costs of abatement are given by (a) (b) 390 (c) MAC 1200 - 20 c. Determine the quantity of emissions that the firm would discharge in the absence of government policy. Determine the socially efficient level of emissions. Calculate the total costs to society for both a and b and draw a diagram illustrating these costs.
There is another entire part of this lesson. Complete the following table with the action each firm will take at this permit price, the amount of pollution each firm will eliminate, and the amount it costs each firm to reduce pollution to the necessary level. If a firm is willing to buy two permits, assume that it buys one permit from each of the other firms. (Hint: Do not include the prices paid for permits in the cost of reducing pollution.) Firm Initial Pollution Permit Allocation Action Final Amount of Pollution Eliminated Cost of Pollution Reduction (Units of pollution) (Units of pollution) (Dollars) Firm A 2 Firm B 2 Firm C 2
Imagine a firm’s marginal abatement cost function with existing technologies is: MAC = 18 – 2E. If the firm adopts new pollution abatement technologies, its marginal abatement cost function will be: MAC = 9 – E. With a tax on emissions of $4, the benefits of adopting the new technologies are $____
See below for three parts of Scenario 2 Scenario 2A. There are three firms, A;B; and C that produce electricity. The first two firms have the same per-megawatt cost of production equal to $2, while firm C has a per-megawatt cost of $1. The firms differ, however, in their pollution. Firms A;B; and C produce respectively 1, 2, and 3 cubic feet of carbon monoxide per megawatt produced. A cubic foot of carbon monoxide pollutes the environment, and has a social cost of $2.5. The demand for electricity is represented by the inverse demand function P (Mw) =100 - Mw, where Mw represents the megawatts consumed by the public. Suppose firms are not held accountable for the pollution they produce. Scenario 2B. Suppose now that the government can measure the amount of pollution issued by each firm, and suppose that the government constrains each firm to emit no more than 9 cubic feet of carbon monoxide. Scenario 2C Suppose that government allows firms to trade their permits to emit carbon…
PRICE (Dollars per ton) 70 63 56 49 42 35 28 + 21 T 14 7 0 Demand +++ 0 40 80 120 160 200 240 280 320 360 400 QUANTITY (Millions of tons) Graph Input Tool Daily Demand for Pollution Rights Price (Dollars per ton) Quantity Demanded (Millions of tons) 7 360 Suppose the government has determined that the socially optimal quantity of particulate matter is 120 million tons per day. One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. A tax (or price in this case) of $ of particulate matter emitted will achieve the desired level of pollution. ? per ton Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to achieve the desired level of pollution. Instead, it auctions off tradable pollution permits. Each permit entitles its owner to emit one ton of particulate matter per day. To achieve the socially optimal quantity of pollution, the government auctions off 120 million…
Lecture: Externality - Pigou8. All-Leather is a tanning company located on Lake Michigan in Chicago. Its total cost functionis C(QA) = 125 + 8QA + 5QA2, where QA is leather production per week in thousands of pounds.a) If leather sells for $408 per thousand pounds, how much leather will All-Leather produce?How much profit does All-leather earn?Enjoy is a beverage company located on Lake Michigan near All-Leather in Chicago. Enjoy’sproduction of beverages is negatively affected by water pollution from All-Leather’s productionof leather. Enjoy’s total cost function to produce beverages isC(QE) = 10QE +3QE2 + 3QA2where QE is Enjoy’s weekly production of beverages, in thousandsof gallons and, as above, QA is All-Leather’s weekly production of leather.b) Is this an example of a pecuniary externality or a real externality? Explain.c) What is the extra cost to Enjoy from an additional thousand tons of leather production by AllLeather (i.e., the external marginal cost of an extra unit of QA…
1. A firm's marginal abatement cost function is given by MAC = 200-5E. Suppose that, after adopting new abatement technology, the firms marginal abatement function becomes MAC = 160-4E. Costs are in dollars per tonne and emissions are in tonnes per year. The firm is given 20 tradeable pollution permits (each permit allows it to emit one tonne of pollution) and the current market price per permit is $100. a)Given no change in the permit price how many tonnes of pollution will the firm emit? b)What will be the firms total abatement cost? Will it buy or sell permits and how many? c) What will be the net cost to the firm after trading? What will be the net gain to the firm from adopting the new abatement technology
See below for three parts of Scenario 2 Scenario 2A. There are three firms, A;B; and C that produce electricity. The first two firms have the same per-megawatt cost of production equal to $2, while firm C has a per-megawatt cost of $1. The firms differ, however, in their pollution. Firms A;B; and C produce respectively 1, 2, and 3 cubic feet of carbon monoxide per megawatt produced. A cubic foot of carbon monoxide pollutes the environment, and has a social cost of $2.5. The demand for electricity is represented by the inverse demand function P (Mw) =100 - Mw, where Mw represents the megawatts consumed by the public. Suppose firms are not held accountable for the pollution they produce. Scenario 2B. Suppose now that the government can measure the amount of pollution issued by each firm, and suppose that the government constrains each firm to emit no more than 9 cubic feet of carbon monoxide. Scenario 2C Suppose that government allows firms to trade their permits to emit carbon…
Supply curves for the production of oil in Sanaton are shown in the diagram below. Supply based on both private and private+social costs is shown. Answer the following questions based on the diagram. Supply (Private + Social) Supply (Private) VE (16000 $70 (22000,$59) Demand Price Quantity What is the equilibrium quantity when negative externalities of producing oil are not taken into account? What is the equilibrium price when negative externalities are not taken into account?