answer (d) Suppose there is a single firm whose profits are determined by:1B(E) = 10E - E²,where E denotes emissions and the expected damagesassociated with E is given by:ӨED(E)=πE² + (1 -+ (1 − π)²²,where 0 <<ẞ. Suppose that the true level of damages isactually equal to0D(E) = E².Page 4 of 5ES3Show that under uncertainty the policymaker is indifferent betweenusing a Pigouvian tax or a standard to control pollution. Illustrate youranswer with a diagram.

You need to show that when there is uncertainty, a policymaker doesn't care whether they use a…

Answered: (d) Suppose there is a single firm…

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 the regulator imposes a Pigouvian tax on each unit of emissions. Calculate each firm's emissions level and the total tax collected.
Gozilla Inc. can generate 100 (CO2) emissions without any regulation. The marginal control cost for Gozilla Inc., associated with emission reduction, is known MC=20+0.5Q where Q is reduced units. Suppose that the regulator impose an emission standard on Gozilla: According to the emission standard, the factory is allowed to emit 40 units. The level of reduction in the emission standard could be accomplished through an emission charge (quantity tax or penalty fee on emission). An emission charge of per emission unit would generate the target amount of reduction. Total (tax) revenue the regulator will collect as emission charges would be Hint: Type integers. Do not use thousands separators.
A polluting firm’s marginal abatement cost is MACi = 50 – 0.25ei . If a regulator imposes a per-unit emissions tax of t = 10, what level of emissions does the firm choose under the tax? A polluting firm’s marginal abatement cost is MACi = 50 – 0.25ei . If a regulator imposes a per-unit emissions tax of t = 10, how many units did the firm abate relative to the unregulated environment?
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. If the government raises the tax on emissions from $2 to $3, then the benefits of adopting the new technologies increase by $ (Hint: when not considering adoption costs, benefits are simply defined by changes in total compliance costs.) Please round your final answer to two decimal places if necessary. Answer:
Firms within the country of Anviliania are currently emitting pollutants. These pollutants cause damages within Anviliania. However, the pollutants also cause damages to the properties and health of residents of countries that share borders with Anviliania. The Marginal Abatement Costs of the firms in Anviliania can be represented by the equation MAC(Anvil.) = 750 -2.3 e The Marginal Damage Costs to the residents of Anviliania are given by MDC (Anvil.) =- - 40 + 10 e The Marginal Damage Costs to all residents (including the residents of Anviliania) are MDC (Globe) = -20+ 12 e a. Draw a diagram representing this situation. b. Determine the magnitude of the local market failure and the global market failure. c. Suppose that the Anvilianian government has given production subsidies to the firms in Anviliania. As a result, the firms have increased production (and the number of firms have increased.). Consequently, the aggregate MAC is now MAC' (Anvil.) = 800 - 2.3 e. Determine the…
Gozilla Inc. can generate 100 (CO2) emissions without any regulation. The marginal control cost for Gozilla Inc., associated with emission reduction, is known MC=20+0.5Q where Q is reduced units. Suppose that the regulator impose an emission standard on Gozilla: According to the emission standard, the factory is allowed to emit 40 units. Gozilla Inc. will clean up regulation is units of pollutant under the emission standard. The total control cost for Gozilla Inc. in this command-and-control Hint: Type integers.
Consider two polluting firms with the following marginal savings functions; MS1 = 20 - e1 for firm 1 MS2 = 40 – 0.5e2 for firm 2 Where e1 and e2 are emission levels for firm 1 and 2, respectively. A. Sketch the MS functions on a diagram. B. Derive the total MS function. Draw it on your diagram above. C. The regulator would like to reduce the level of total emissions by 60% from their unregulated level. What is the total reduction in emissions needed? i. If the regulator decides emissions be cut using equiproportionate reduction, how much is each firm required to reduce? Explain whether this would be a cost-effective way to reduce emissions? ii. If instead the regulator decides to use an emission fee, what level should the fee be set to achieve the desired level of emissions? How much would each firm emit? Illustrate your answer on the diagram above. iii. In (ii) above, do the firms emit different amounts in the presence of the emission fee? Does it make sense that they should…
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QA and QS are the pollution levels for Arrow and Solow Industries, respectively. Profits (benefits) associatedwith polluting activity, πi(i = A, S) are πA=10QA−0.5QA2 and πS=20QS−QS2. The marginal benefits (profits) for each firm are MBA=10−QA and MBS=20−2QS. 2.9 Suppose Arrow is located in a remote rural area, with very low pollution levels (marginal damage = 6), while Solow is located in an urban area, with other pollution sources and many more people exposed (marginal damage = 12). What is the efficient pollution allocation in this case? Note: question puts us back in the world of economic efficiency (i.e., where we maximize net social benefit) as opposed to the world of cost- efficiency where we minimize costs associated with reaching an environmental target. So here net benefit is equal to Benefits from pollution minus Pollution Damages. Since locations are not interdependent, you can find the pollution levels which maximize net social benefits from A’s pollution and then…
. Appalachian Coal Mining believes that it can increase labor productivity and, therefore, net revenue by reducing air pollution in its mines. It estimates that the marginal cost function for reducing pollution by installing additional capital equipment is MC=40P Where P represents a reduction of one unit of pollution in the mines. It also feels that for every unit of pollution reduction the marginal increase in revenue (MR) is MR=1000-10P How much pollution reduction should Appalachian Coal Mining undertake?
Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC 110-2E_1 MAC 2 = 16-4E_2. If both firms were forced to eliminate all of their emissions, their combined total abatement costs (TAC) would be Answer:
Consider an industry with two firms that emit a uniformly mixed air pollutant (e.g., carbon dioxide). The marginal abatement cost functions for Firm 1 and Firm 2 are: MAC1 = 100 - e1 MAC2 = 100 - 4e2 Aggregate emissions for the industry are denoted as E = e1 + e2. 1. In an unregulated environment how many units of emissions does each firm emit? Firm 1’s unregulated level of emissions ____________ Firm 2’s unregulated level of emissions ____________ Total unregulated level of emissions ______________ Suppose a regulator has a goal of reducing the total level of emissions from the amount from the amount you answered in [1] to 25 units. The regulator would like to achieve the goal of 25 units of total emissions in a cost-effective way. To do so it issues 25 permits, 10 are given to Firm 1 and 15 are given to Firm 2. A firm can only emit a unit of pollution if they have a permit for that unit, otherwise they must abate. After the permits are allocated,…

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