Firms in a polluting industry can be classified in two groups: newer firms with a cleaner technology that can abate pollution at a lower marginal cost M CLA L = (1/2) aL and older Örms with dirtier M CAH = aH , where ai is the level of abatement undertaken by firms of type i = L,H. The social marginal benefit of abating pollution from this particular industry is MBA = 120 - A, where A is the aggregate level of abatement in that industry:(a) To design an efficient emissions standard, the government needs to determine which is the efficient abatement allocation (aL; aH ). In order to do this, obtain a cost e§ective abatement allocation (aL;aH) that provides an aggregate abatement level A = a*L , a*H and then proceed to determine the efficient level A * (Hint: You should obtain that MCA = A/3). 4. Firms in a polluting industry can be classified in two groups: newer Örms with a cleanertechnology that can abate pollution at a lower marginal cost M CAL= (1/2) a and older Örms withdirtier M CA, = ay , where a; is the level of abatement undertaken by firms of type i = L,H. Thesocial marginal benefit of abating pollution from this particular industry is MBA = 120 - A, where Ais the aggregate level of abatement in that industry:(a) To design an efficient emissions standard, the government needs to determine which is the efficientabatement allocation (aL; aH ). In order to do this, obtain a cost eşective abatement allocation (aL;aH) thatprovides an aggregate abatement level A = a, a'H and then proceed to determine the efficient level A(Hint: You should obtain that MCA =A/3).

Given : Newer Örms Lower marginal cost : M CLA L = (1/2) aL Older Örms with dirtier :M CAH = aH…

Answered: irms in a polluting industry can be…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Firms in a polluting industry can be classified in two groups: newer firms with a cleaner technology that can abate pollution at a lower marginal cost M CLA L = (1/2) aL and older Örms with dirtier M CAH = aH , where ai is the level of abatement undertaken by firms of type i = L,H. The social marginal benefit of abating pollution from this particular industry is MBA = 120 - A, where A is the aggregate level of abatement in that industry:

(a) To design an efficient emissions standard, the government needs to determine which is the efficient abatement allocation (aL; aH ). In order to do this, obtain a cost e§ective abatement allocation (aL;aH) that provides an aggregate abatement level A = a*L , a*H and then proceed to determine the efficient level A * (Hint: You should obtain that MCA = A/3).

4. Firms in a polluting industry can be classified in two groups: newer Örms with a cleaner
technology that can abate pollution at a lower marginal cost M CAL= (1/2) a and older Örms with
dirtier M CA, = ay , where a; is the level of abatement undertaken by firms of type i = L,H. The
social marginal benefit of abating pollution from this particular industry is MBA = 120 - A, where A
is the aggregate level of abatement in that industry:
(a) To design an efficient emissions standard, the government needs to determine which is the efficient
abatement allocation (aL; aH ). In order to do this, obtain a cost eşective abatement allocation (aL;aH) that
provides an aggregate abatement level A = a, a'H and then proceed to determine the efficient level A
(Hint: You should obtain that MCA =
A/3).

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