Method 2: Tradable PermitsMeanwhile, the other employee proposes using a different strategy to achieve the government's goal of reducing pollution in the area from 12 units to6 units. This employee suggests that the government issue two pollution permits to each firm. For each permit a firm has in its possession, it can emit1 unit of pollution. Firms are free to trade pollution permits with one another (that is, buy and sell them) as long as both firms can agree on a price.For example, if firm X agrees to sell a permit to firm Y at an agreed-upon price, then firm Y would end up with three permits and would need to reduceits pollution by only 1 unit while firm X would end up with only one permit and would have to reduce its pollution by 3 units. Assume the negotiationand exchange of permits are costless.Because firm Y has high pollution-reduction costs, it thinks it might be better off buying a permit from firm X and a permit from firm Z so that itdoesn't have to reduce its own pollution emissions. At which of the following prices are both firm X and firm Z willing to sell one of their permits tofirm Y? Check all that apply.$102$164D$179$410$708Suppose the the government has set the trading price of a permit at $182 per permit.81°FSunny& 5. Correcting for negativeSuppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in thearea, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following twomethods:Available Methods to Reduce Pollution1. The government sets pollution standards using regulation.2. The government allocates tradable pollution permits.Each firm faces different costs, so reducing pollution is more difficult for some firms than others. The following table shows the cost each firm faces toeliminate each unit of pollution. For each firm, assume that the cost of reducing pollution to zero (that is, eliminating all 4 units of pollution) isprohibitively expensive.Cost of Eliminating the...First Unit of PollutionSecond Unit of Pollution Third Unit of PollutionFirm(Dollars)(Dollars)(Dollars)Firm X801001501,050Firm Y450800Firm Z95120200Esc81°FSunny1/F20-@2F30+#3F4$4F5OLF6%5F7A64-F8C&7F9*8CalF10O(F11DF122FnLockInsertPrt S

Tradable pollution permits, also known as cap-and-trade systems, are a market-based approach to…

Method 2: Meanwhile, the other employee proposes using a different strategy to achieve the government's goal of reducing pollution in the area from 12 units to 6 units. This employee suggests that the government issue two pollution permits to each firm. For each permit a firm has in its possession, it can emit 1 unit of pollution. Firms are free to trade pollution permits with one another (that is, buy and sell them) as long as both firms can agree on a price. For example, if firm X agrees to sell a permit to firm Y at an agreed-upon price, then firm Y would end up with three permits and would need to reduce its pollution by only 1 unit while firm X would end up with only one permit and would have to reduce its pollution by 3 units. Assume the negotiation and exchange of permits are costless. Because firm Y has high pollution-reduction costs, it thinks it might be better off buying a permit from firm X and a permit from firm Z so that it doesn't have to reduce its own pollution emissions. At which of the following prices are both firm X and firm Z willing to sell one of their permits to firm Y? Check all that apply. O $102 $164 D$179 $410 $708

Method 2: Meanwhile, the other employee proposes using a different strategy to achieve the government's goal of reducing pollution in the area from 12 units to 6 units. This employee suggests that the government issue two pollution permits to each firm. For each permit a firm has in its possession, it can emit 1 unit of pollution. Firms are free to trade pollution permits with one another (that is, buy and sell them) as long as both firms can agree on a price. For example, if firm X agrees to sell a permit to firm Y at an agreed-upon price, then firm Y would end up with three permits and would need to reduce its pollution by only 1 unit while firm X would end up with only one permit and would have to reduce its pollution by 3 units. Assume the negotiation and exchange of permits are costless. Because firm Y has high pollution-reduction costs, it thinks it might be better off buying a permit from firm X and a permit from firm Z so that it doesn't have to reduce its own pollution emissions. At which of the following prices are both firm X and firm Z willing to sell one of their permits to firm Y? Check all that apply. O $102 $164 D$179 $410 $708

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the following decision by two countries: a small country (C1) and a large country (C2). When both countries cooprate and agree to an environmental agreement, C1 receives 4 and C2 receives 5 units of benefit. When they do not cooperae, they incur costs of -1, and -2, respectively. The payoffs associated with other outcomes are described in the table below. Large country (C2) Agree to environmental protection (cooperate) Do not agree to environmental protection (do not cooperate) The Socially Optiomal outcome is The Nash Equilibrium is Agree to environmental protection (cooperate) C1:4 C2: 5 C1: 2 C2: 6 [Choose ] Small country (C1) [Choose ] Do not agree to environmental protection (do not cooperate) C1:2 C2: -3 C1: -1 C2: -2
In 1998, California became the first state to adopt rules requiring many sport utility vehicles, pickups, and minivans to meet the same pollution standards as regular cars, effective in 2004. As the deadline drew near, a business group (which may have an incentive to exaggerate) estimated that using the new technology to reduce pollution would increase vehicle prices by as much as $7,000. A spokesperson for the California Air Resources Board, which imposed the mandate, said that the additional materials cost was only about $70 to $270 per vehicle. Suppose that the two major producers are Toyota and Ford, and these firms were price setters with differentiated products. Show the effect of the new regulation. Is it possible that the price for these vehicles would rise by substantially more than the marginal cost would? Explain your answer.
Suppose a municipality votes to reduce the combined pollution introduced by three local companies. Presently, each firm creates 4 units of pollution in the area, for a total of 12 pollution units. The government can reduce total pollution in the area to 6 units by choosing between the following two methods: Methods to Reduce Pollution 1. The government imposes pollution standards using regulation. 2. The government issues tradable pollution permits. The costs faced by each firm are different, so it is more difficult for some firms to reduce pollution than others. The following table shows the cost faced by each firm to eliminate each unit of pollution. Assume that the cost of eliminating all 4 units of pollution (that is, reducing pollution to zero) is prohibitively expensive for all three firms. Firm Firm A Firm B Firm C First Unit of Pollution (Dollars) 80 550 75 Cost of Eliminating the... Second Unit of Pollution Third Unit of Pollution (Dollars) 210 1,075 130 (Dollars) 130 700 90…
There is another entire part of this lesson. Complete the following table with the action each firm will take at this permit price, the amount of pollution each firm will eliminate, and the amount it costs each firm to reduce pollution to the necessary level. If a firm is willing to buy two permits, assume that it buys one permit from each of the other firms. (Hint: Do not include the prices paid for permits in the cost of reducing pollution.) Firm Initial Pollution Permit Allocation Action Final Amount of Pollution Eliminated Cost of Pollution Reduction (Units of pollution) (Units of pollution) (Dollars) Firm A 2 Firm B 2 Firm C 2
(1) Two firms (A and B) that produce timber products pollute a local forest with pesticides used to grow trees. Currently, firm A releases 100 pounds of pesticide waste into the forest per month, while firm B releases 140 pounds of pesticide waste into forest per month. The table below shows the cost of reducing pesticide waste by increments of 10 pounds for each firm. For each firm, reductions beyond 50 pounds would be virtually impossible to accomplish and expensive if it is to stay in business, because some pesticide must be used. Total cost of reducing Firm A pesticide waste by 10 pounds 20 pounds 30 pounds 40 pounds 50 pounds Firm B $6 $4 $18 $12 $36 $24 $60 $40 $90 $64 Suppose the government wants to reduce pesticide waste level to 180 pounds. That is, the government wants to reduce pesticide waste from its current monthly level to 180 pounds per month. To achieve this goal, the government decides to issue permits to pollute. A total of 18 permits are issued, where each permit…
Suppose a municipality votes to reduce the combined pollution introduced by three local companies. Presently, each firm creates 4 units of pollution in the area, for a total of 12 pollution units. The government can reduce total pollution in the area to 6 units by choosing between the following two methods: Methods to Reduce Pollution 1. The government imposes pollution standards using regulation. 2. The government issues tradable pollution permits. The costs faced by each firm are different, so it is more difficult for some firms to reduce pollution than others. The following table shows the cost faced by each firm to eliminate each unit of pollution. Assume that the cost of eliminating all 4 units of pollution (that is, reducing pollution to zero) is prohibitively expensive for all three firms. Firm Firm A Firm B Firm C First Unit of Pollution (Dollars) 80 550 75 Cost of Eliminating the... Second Unit of Pollution Third Unit of Pollution (Dollars) 210 1,075 130 (Dollars) 130 700 90…
Lecture: Externality - Pigou8. All-Leather is a tanning company located on Lake Michigan in Chicago. Its total cost functionis C(QA) = 125 + 8QA + 5QA2, where QA is leather production per week in thousands of pounds.a) If leather sells for $408 per thousand pounds, how much leather will All-Leather produce?How much profit does All-leather earn?Enjoy is a beverage company located on Lake Michigan near All-Leather in Chicago. Enjoy’sproduction of beverages is negatively affected by water pollution from All-Leather’s productionof leather. Enjoy’s total cost function to produce beverages isC(QE) = 10QE +3QE2 + 3QA2where QE is Enjoy’s weekly production of beverages, in thousandsof gallons and, as above, QA is All-Leather’s weekly production of leather.b) Is this an example of a pecuniary externality or a real externality? Explain.c) What is the extra cost to Enjoy from an additional thousand tons of leather production by AllLeather (i.e., the external marginal cost of an extra unit of QA…
Suppose two utilities, People's Electric and Municipal Energy, each produce 300 tons of pollution per year. The government has a goal of eliminating half the pollution, and, in turn, provides 150 pollution permits to each utility. A pollution permit is required to legally produce a ton of pollution. However, the two utilities are allowed to trade permits. Suppose the cost of eliminating one ton of pollution for People's Electric is $100 and the cost of eliminating a ton of pollution for Municipal Energy is $50. The total cost of each utility eliminating 150 tons of pollution is $22,500 (Enter your response as a whole number.) If the two utilities buy and sell permits with each other, then the minimum cost of eliminating 300 tons of pollution is $. (Enter your response as a whole number.)
Suppose the government aims to abate 20 tons of pollution from two firms. Firm 1's abatement cost function is MAC1 = A1, firm 2's abatement function is MAC2 = 4A2, where A1 and A2 represent the amount of abatement conducted by firm 1 and firm 2 individually. How many tons should firm 1 and firm 2 abate to minimize total abatement cost? Blank #1: Firm 1's amount of abatement Blank #2 : Firm 2's amount of abatement
Suppose a municipality votes to reduce the combined pollution introduced by three local companies. Presently, each firm creates 4 units of pollution in the area, for a total of 12 pollution units. The government can reduce total pollution in the area to 6 units by choosing between the following two methods: Methods to Reduce Pollution 1. The government imposes pollution standards using regulation. 2. The government issues tradable pollution permits. The costs faced by each firm are different, so it is more difficult for some firms to reduce pollution than others. The following table shows the cost faced by each firm to eliminate each unit of pollution. Assume that the cost of eliminating all 4 units of pollution (that is, reducing pollution to zero) is prohibitively expensive for all three firms. Firm Firm A Firm B Firm C First Unit of Pollution (Dollars) 130 600 90 Cost of Eliminating the... Second Unit of Pollution Third Unit of Pollution (Dollars) (Dollars) 165 220 750 1,200 115 140
Global warming is mainly caused by Greenhouse gas (GHG) (i.e., CO2) emission. Aiming to be carbon neutral by 2060, China starts penalizing the polluting firms by introducing a specific tax to those firms. (Source: https://www.nature.com/articles/d41586-020-02927-9)Suppose you are the owner of a profit-maximizing firm in China that produces goods with carbon emission. The specific tax (with tax rate t) is imposed in proportion to the quantity of your firm’s output (q). The market of your firm’s product is assumed to be perfectly competitive. Assume there is no fixed cost: use a fully labelled diagram to show the effect of the tax on the cost curves, and briefly discuss the movement of the curves. (10 marks) Suppose China government decides to raise the tax rate. Discuss the impact of the rise on your firm's output level with economic models wherever necessary. (20 marks)