Consider the pollution industry. Suppose that 10,000 identical agents are affected by this industry’s pollution and each one of them privately values its abatement in M BiA = 0.018 (1/10,000), where 1 - 1; ...; 10,000. Because this is non-depletable multilateral pollution, abatement is a public good.i. Explain why this private marginal benefit is consistent with the social marginal benefit in the problem’s statement.ii. Obtain the abatement level A0 that would prevail if abatement services (or abatement rights) were traded in an unregulated private market? What would be the deadweight loss? Consider the same industry as in the preceding question. Suppose that10,000 identical agents are affected by this industry's pollution and eachone of them privately values its abatement in MB, = 0.018 – (1/10,000),where 1 – 1, ., 10, 000. Because this is non-depletable multilateral pollu-tion, abatement is a public good.A....(a) i. Explain why this private marginal benefit is consistent with thesocial marginal benefit in the problem's statement.ii. Obtain the abatement level A° that would prevail if abatementservices (or abatement rights) were traded in an unregulated pri-vate market? What would be the deadweight loss?

Answered: - Consider the same industry as in the…

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 the pollution industry. Suppose that 10,000 identical agents are affected by this industry’s pollution and each one of them privately values its abatement in M BiA = 0.018 (1/10,000), where 1 - 1; ...; 10,000. Because this is non-depletable multilateral pollution, abatement is a public good.

i. Explain why this private marginal benefit is consistent with the social marginal benefit in the problem’s statement.

ii. Obtain the abatement level A0 that would prevail if abatement services (or abatement rights) were traded in an unregulated private market? What would be the deadweight loss?

Consider the same industry as in the preceding question. Suppose that
10,000 identical agents are affected by this industry's pollution and each
one of them privately values its abatement in MB, = 0.018 – (1/10,000),
where 1 – 1, ., 10, 000. Because this is non-depletable multilateral pollu-
tion, abatement is a public good.
A
....
(a) i. Explain why this private marginal benefit is consistent with the
social marginal benefit in the problem's statement.
ii. Obtain the abatement level A° that would prevail if abatement
services (or abatement rights) were traded in an unregulated pri-
vate market? What would be the deadweight loss?

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