Consider the marginal cost and marginal benefit of reducing air pollution illustrated in the figure to the right Suppose the reduction in air pollution is currently 3 million tons per year. In private bargaining, what is the minimum amount polluters would have to be paid to be willing to reduce air pollution by an additional 2 million tons to 5 million tons? million (Enter a numeric response using an integer) In private bargaining, what is the maximum amount the parties who benefit from pollution reduction would be to pay to pollution by an million (Enter a numeric response using an integer) What would be the net benefit to society of reducing air pollution by another 2 million tons? Cost or benet (doilars per ton) 350 300 250 200 150 100- 50 Marginal Cost Reductions in air pollution i Marginal Dent tons)

Consider the marginal cost and marginal benefit of reducing air pollution illustrated in the figure to the right Suppose the reduction in air pollution is currently 3 million tons per year. In private bargaining, what is the minimum amount polluters would have to be paid to be willing to reduce air pollution by an additional 2 million tons to 5 million tons? million (Enter a numeric response using an integer) In private bargaining, what is the maximum amount the parties who benefit from pollution reduction would be to pay to pollution by an million (Enter a numeric response using an integer) What would be the net benefit to society of reducing air pollution by another 2 million tons? Cost or benet (doilars per ton) 350 300 250 200 150 100- 50 Marginal Cost Reductions in air pollution i Marginal Dent tons)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Van and Amy each rent one unit of a two-unit apartment building. The building has two separate furnaces located between the two apartments. The renters each control and pay for the heat their furnaces generate and would choose to increase the temperature of their apartments by 45 degrees if the other never turned on their furnace, given that the marginal private benefit (MB) of the 45th degree is equal to the marginal cost (MC) of 1 degree of heat (assume that the MC of heat is constant and that the MB of heat is decreasing). However, each degree of heat paid for by one not only raises the temperature in that apartment by a degree but also raises the temperature in the other apartment by half a degree. As a result, if Amy were to buy 40 degrees of heat, then Van would need to purchase only benefit of the final degree was equal to the marginal cost. Use the blue line (circle symbol) to plot Van's best-response function (BRF) on the following graph, with the total amount of heat he will…
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Two countries the US (U) and Fiji (F). Each country i E {U, F} can decide whether to impose a positive tax on the emissions of its polluting firms (t¡> 0) or to impose no tax (t; = 0). We can think of a representative firm that chooses whether to produce using a polluting technology (q = P) or a clean technology (q = C). The polluting technology generates profits of л(P) = 11. The clean technology generates profits of л(P) = 10 and doesn't have to pay tax. Assume that when the firm is indifferent between the two technologies, it chooses the clean technology. Imposing a tax of t = 1, profits of firms using polluting technology would equal profits of firms using clean technology. Let us now turn to the decisions that the governments would make if they were inde- pendently choosing whether to impose a tax or not. In the US, firms using the clean technology emit a total of 0 tonnes of CO2 emissions, while firms using the polluting technology emit a total of 900 tonnes of CO2 emissions. In…
2. In this question we will combine a very simplified model of an externality that has long-lasting impacts with the model of discounted utility that we learned in our game theory topic. Consider a hypothetical environmental externality: produced as the byproduct of industrial activity, each unit of emission of a pollutant that is emitted once, today, causes $10 of external harm to society each and every year, starting immediately, forever. Let's say that policymakers apply a discount factor of 8 € (0, 1) to future gains and losses, in an analog of the discounted utility model except for cash payoffs rather than utilities. What would the socially efficient Pigouvian tax on the emission of this pollutant be if we applied a discount factor of (i) 8 = 0.5, (ii) 6 = 0.9, and (iii) 8 = 0.99? Give an intuitive explanation of how to interpret the parameter & in this context, and explain precisely but in simple terms what the goal and effect of the Pigouvian tax would be.
Suppose the the government has set the trading price of a permit at $126 per permit. 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 Firm A Firm B Firm C Initial Pollution Permit Allocation (Units of pollution) 2 2 2 Regulation Versus Tradable Permits Action Proposed Method Regulation Tradable Permits Final Amount of Pollution Eliminated (Units of pollution) Cost of Pollution Reduction (Dollars) Determine the total cost of eliminating six units of pollution using 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…
Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two methods: Available Methods to Reduce Pollution 1. The government sets pollution standards using regulation. 2. The government allocates tradable pollution permits. Each firm faces different costs, so reducing pollution is more difficult for some firms than others. The following table shows the cost each firm faces to eliminate each unit of pollution. For each firm, assume that the cost of reducing pollution to zero (that is, eliminating all 4 units of pollution) is prohibitively expensive. Firm Cost of Eliminating the... First Unit of Pollution Second Unit of Pollution Third Unit of Pollution (Dollars) (Dollars) (Dollars) Firm X 90 125 180…
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2. In this question we will combine a very simplified model of an externality that has long-lasting impacts with the model of discounted utility that we learned in our game theory topic. Consider a hypothetical environmental externality: produced as the byproduct of industrial activity, each unit of emission of a pollutant that is emitted once, today, causes $10 of external harm to society each and every year, starting immediately, forever. Let's say that policymakers apply a discount factor of 8 € (0, 1) to future gains and losses, in an analog of the discounted utility model except for cash payoffs rather than utilities. What would the socially efficient Pigouvian tax on the emission of this pollutant be if we applied a discount factor of (i) 8 = 0.5, (ii) 6 = 0.9, and (iii) 8 = 0.99? Give an intuitive explanation of how to interpret the parameter & in this context, and explain precisely but in simple terms what the goal and effect of the Pigouvian tax would be.
There are two firms, A and B emitting sulfur dioxide. In total, they emit 100 tons of sulfur dioxide. The EPA wants to reduce sulfur dioxide emissions by 60 tons so that the final level of emissions in only 40 tons. The table below shows the emissions and cost of abatement for each firm. If the EPA were to issue 40 tradeable pollution permits, 20 to each firm, where each pollution permit allows 1 ton of emission, what would the final allocation of permits across the two firms be if they traded permits with esch other? sO, Emission Cost per ton of so, reduction Company Firm A 30 tons $1,000 per ton Firm B 70 tons $800 per ton Total Emissions 100 tons Select an answer and submit. For keyboard navigation, use the up/down arow keys to select an answer. a Each firm will have 20 permits. b. Firm A will have all 40 permits. Firm A will have 30 permits and Firm B will have 10 permits. Firm A will have 10 permits and Firm B will have 30 permits.
Consider the following decision by two countries: a small country (C1) and a large country (C2). When both countries cooprate and agree to an environmental agreement, C1 receives 4 and C2 receives 5 units of benefit. When they do not cooperae, they incur costs of -1, and -2, respectively. The payoffs associated with other outcomes are described in the table below. Large country (C2) Agree to environmental protection (cooperate) Do not agree to environmental protection (do not cooperate) The Socially Optiomal outcome is The Nash Equilibrium is Agree to environmental protection (cooperate) C1:4 C2: 5 C1: 2 C2: 6 [Choose ] Small country (C1) [Choose ] Do not agree to environmental protection (do not cooperate) C1:2 C2: -3 C1: -1 C2: -2