The graph illustrates the marginal abatement cost (MAC) and marginal damage cost curve (MDC) of pollution emissions. Marginal cost $62 54 35 19 15 0 23 MDC MAC 45 61 87 Quantity of pollution emissions (tons) 2. What is the socially optimal Optimal pollution emissions: 1.For the 1st unit of pollution emissions, the MAC is A. equal to the MDC. B. less than the MDC. C. greater than the MDC. quantity of pollution emissions? tons 3.A market will produce A. Less than the socially optimal quantity B. More than the socially optimal quantity C. The socially optimal quantity of pollution emissions.

The graph illustrates the marginal abatement cost (MAC) and marginal damage cost curve (MDC) of pollution emissions. Marginal cost $62 54 35 19 15 0 23 MDC MAC 45 61 87 Quantity of pollution emissions (tons) 2. What is the socially optimal Optimal pollution emissions: 1.For the 1st unit of pollution emissions, the MAC is A. equal to the MDC. B. less than the MDC. C. greater than the MDC. quantity of pollution emissions? tons 3.A market will produce A. Less than the socially optimal quantity B. More than the socially optimal quantity C. The socially optimal quantity of pollution emissions.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Price 24 20 16 12 1 1 I 1 I I I I 1 I 20 28 K 36 MSC MPC MSB Quantity 1. What type of externality does the graph above show? 2. Without government intervention, how much will be produced in this market? 3. Without government intervention, what price will be charged in this market? 4. If the government wants to intervene in this market to eliminate externalities, which of the following is the best choice?
No hand written solution Afirm has an industrial plant that emits pollutants into a town’s lake. The plant’s marginal abatement function is MAC= 200 – 0.5E and damages caused by its emissions are given by MD = 2E where emissions are in kg. per day. What is the socially efficient level of emissions from this plant? Illustrate this in a graph. As an incentive to reduce emissions to the socially efficient level, government offers to pay the firm for each kg. of emissions it abates per day from this plant. What subsidy per kg. should the government offer? If the plant abates to the socially efficient level of emissions, what total subsidy payment would the firm receive? Identify the area in your graph. How much better or worse off would the firm be compared to if it did no abating? Identify the area in your graph. What would be the net benefit to society if we pay the firm to reduce the plant’s emissions to the socially efficient level? Identify this area in your graph.
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