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 $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?
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