Imagine a firm with a marginal abatement cost (MAC) function equal to: MAC 24-3E. The government offers a $6 per-unit subsidy for abatement. In principle, the firm could ignore the subsidy and continue to emit as many emissions as it was in the absence of government intervention, but there is money to be made from cutting back its emissions. Compared to ignoring the subsidy, how much money could a cost- minimizing firm save or make by cutting back its emissions? (Hint: remember that firms trade off the benefits of the subsidy with the costs of abatement when deciding how much to abate) Answer:
Imagine a firm with a marginal abatement cost (MAC) function equal to: MAC 24-3E. The government offers a $6 per-unit subsidy for abatement. In principle, the firm could ignore the subsidy and continue to emit as many emissions as it was in the absence of government intervention, but there is money to be made from cutting back its emissions. Compared to ignoring the subsidy, how much money could a cost- minimizing firm save or make by cutting back its emissions? (Hint: remember that firms trade off the benefits of the subsidy with the costs of abatement when deciding how much to abate) Answer:
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Imagine a firm with a marginal abatement cost (MAC) function equal to:
MAC 24-3E.
The government offers a $6 per-unit subsidy for abatement. In principle, the firm could
ignore the subsidy and continue to emit as many emissions as it was in the absence of
government intervention, but there is money to be made from cutting back its
emissions. Compared to ignoring the subsidy, how much money could a cost-
minimizing firm save or make by cutting back its emissions?
(Hint: remember that firms trade off the benefits of the subsidy with the costs of
abatement when deciding how much to abate)
Answer:
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