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 $____.
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 $____.
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter17: Externalities And The Environment
Section: Chapter Questions
Problem 6QFR
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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 $____.
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