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:

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:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that a firm's marginal abatement cost function with existing technologies is MAC = 12 - E. If the firm adopts new pollution abatement technologies, then its marginal abatement cost function will become MAC = 6 - 0.5E. With an emissions tax of $3, the benefits of adopting the new technologies equal $__. Please round your final answer to two decimal places if necessary. Answer:
2) Suppose the demand curve for a rubber-based product is Q_D=225-0.5P, and the supply curve is Q_S=0.5P-15. If the external cost of the suit from the waste produced by the factory producing the item is MEC-Q, calculate: (a) Competitive price and quantity when there is no control over the waste disposal of the factory. (b) Price and quantity at the socially optimal level.
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Suppose that a firm's marginal abatement cost function with existing technologies is MAC = 12 - E. If the firm adopts new pollution abatement technologies, then its marginal abatement cost function will become MAC = 6 - 0.5E. With an emissions tax of $4, the benefits of adopting the new technologies equal $____. Please round your final answer to two decimal places if necessary. THE ANSWER IS NOT 16 Maybe 4?
The supply and demand of sugar are given as Qs = 5P, Qd = 250- P where Qs is tons supplied per year, P is the price per ton; Qd is tons demanded per year. Because of the pollution associated with production, marginal external costs of 40 are associated with each ton of sugar. Assuming that sugar is sold in a competitive market, What is the market price? How many tons of paper will be produced per year at that price? What is the efficient output of paper? What is the amount of total Pigouvian tax to achieve efficiency? What is the amount of total Pigouvian subsidy to achieve efficiency?
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The supply and demand of sugar are given as Qs = 5P, Qd = 250- P where Qs is tons supplied per year, P is the price per ton; Qd is tons demanded per year. Because of the pollution associated with production, marginal external costs of 40 are associated with each ton of sugar. Assuming that sugar is sold in a competitive market, What is the market price? How many tons of paper will be produced per year at that price? What is the efficient output of paper? What is the amount of total Pigouvian tax to achieve efficiency? What is the amount of total Pigouvian subsidy to achieve efficiency?
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)
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