irms 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 a

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
  1. 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 MB= 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).
Transcribed Image Text: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).
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Clean Air Act
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education