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 (Dollars) 165 750 115 Third Unit of Pollution (Dollars) 220 1,200 140

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 (Dollars) 165 750 115 Third Unit of Pollution (Dollars) 220 1,200 140

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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two types of consumers( workers an retirees) share a community with a polluting cheese factory. the polution is nonrival and nonexcludable. the total damage to workers is p2 where p is the amount of pollution and the total damage to retirees is 3p2 . thus marginal damage to workers is 2p and marginal damage to retirees is 6p. according to an anlaysis by consulting engineers, the cheese factory saves 20p-p2 by pollluting p, for a marginal savings of 20-2p. a.Find the aggregate(including both types of sonsumers) marginal damage for the public bad. b..graph the marginal savings and aggregate marginal damage curves with pollution on the horizontal axis. c. how much will the cheese factory pollute in the abscence of any regulation or bargaining? what is the societys optimal level of pollution? d. starting from the uncontrolled level of pollution calculated in part(c), find the marginal willingness to pay for pollution abatment, A, for each consumer class. (abatment is the reduction in…
Firms A and B each produce 80 units of pollution. The federal government wants to reduce pollution levels. The marginal costs associated with pollution reduction are MCA = 50 + 3QA for firm A and MCB = 20 + 6QB for firm B, where QA and QB are the quantities of pollution reduced by each firm. Society's marginal benefit from pollution reduction is given by MB = 590- 3Qtot, where Qtot is the total reduction in pollution. The socially optimal level of firm A's pollution reduction is Hint: Type integers. reduction is The socially optimal level of firm B's pollution
Which of the following statements about pollution taxes, cap and trade, or command-and-control standards is FALSE? a.) Pollution taxes strictly control the amount of pollution but leave marginal abatement costs to be determined by the market. Cap-and-trade programs strictly control marginal abatement costs but leave the actual amount of pollution to be determined by the overall level of economic activity. b.) Pollution taxes are unpopular in the U.S. because American companies tend to dislike taxes in general. However, pollution taxes offer firms some greater certainty about how large will be their marginal cost of abatement on the last unit of abatement they will need to do, if they are to minimize the costs they incur both for cleanup and for pollution taxes. c.) Both command-and-control pollution standards, and cap-and-trade programs, can effectively limit the total amount of pollution, but command and control will be least-cost only by accident. Usually,…
An externality, which is sometimes also called a (Spillover OR Social cost) , can have a negative or a positive impact on the third party. An externality occurs when an exchange between a (Buyer and seller OR Population of two cities) has an impact on a third party who (Is not OR is) part of the exchange. For a negative externality, the private costs of an action are (Less or More) than the costs imposed on society as a whole. For a positive externality, the private benefits of an action are (Less or More) than the social benefits. An example of positive externality is (Vccination OR Good wether), whereas an example of negative externality is (Population OR Hurricane)
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…
Back to Assignment Attempts Keep the Highest / 2 9. Private solutions to correct for externalities Consider the following scenario: Suppose that a chicken farm uses a nearby stream to dispose of the wastes released by its chickens. These wastes flow downstream into a lake that has become thick with algae and polluted by the minerals in the waste matter. The local office of a nonprofit environmental organization collects enough donations to fund a campaign to stop the farm's pollution. Which of the following types of private solutions to the externality of pollution has occurred in this case? O Charities O Integration of different types of businesses through merger or acquisition O Moral codes and social sanctions O Contracts It's important to note that sometimes private solutions to externalities do not work. For example, this occurs when an excessive amount of time or money must be spent for parties to reach an agreement. This describes the problem of Grade It Now Save & Continue…
See below for three parts of Scenario 2 Scenario 2A. There are three firms, A;B; and C that produce electricity. The first two firms have the same per-megawatt cost of production equal to $2, while firm C has a per-megawatt cost of $1. The firms differ, however, in their pollution. Firms A;B; and C produce respectively 1, 2, and 3 cubic feet of carbon monoxide per megawatt produced. A cubic foot of carbon monoxide pollutes the environment, and has a social cost of $2.5. The demand for electricity is represented by the inverse demand function P (Mw) =100 - Mw, where Mw represents the megawatts consumed by the public. Suppose firms are not held accountable for the pollution they produce. Scenario 2B. Suppose now that the government can measure the amount of pollution issued by each firm, and suppose that the government constrains each firm to emit no more than 9 cubic feet of carbon monoxide. Scenario 2C Suppose that government allows firms to trade their permits to emit carbon…
Back to Assignment Attempts Keep the Highest / 3 7. Correcting for negative externalities - Taxes versus tradable permits Paper factories emit chemicals as a waste product. This generates a cost to society that is not paid for by the firm; therefore, pollution is a negative externality of paper production. Suppose the U.S. government wants to correct this market failure by getting firms to internalize the cost of pollution. To do this, the government can charge firms for pollution rights (the right to emit a given quantity of chemicals). The following graph shows the daily demand for pollution rights. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool (? Daily Demand for Pollution Rights 90 81 I Price (Dollars per ton) 72 Quantity Demanded (Millions of tons) 450…
See below for three parts of Scenario 2 Scenario 2A. There are three firms, A;B; and C that produce electricity. The first two firms have the same per-megawatt cost of production equal to $2, while firm C has a per-megawatt cost of $1. The firms differ, however, in their pollution. Firms A;B; and C produce respectively 1, 2, and 3 cubic feet of carbon monoxide per megawatt produced. A cubic foot of carbon monoxide pollutes the environment, and has a social cost of $2.5. The demand for electricity is represented by the inverse demand function P (Mw) =100 - Mw, where Mw represents the megawatts consumed by the public. Suppose firms are not held accountable for the pollution they produce. Scenario 2B. Suppose now that the government can measure the amount of pollution issued by each firm, and suppose that the government constrains each firm to emit no more than 9 cubic feet of carbon monoxide. Scenario 2C Suppose that government allows firms to trade their permits to emit carbon…
A steel plant causes about 100 tons of pollution to be released for every 100 tons of steel. Every ton of pollution causes $4 worth of damage to the local town. The MC(Q)=27Q, What is the SMC(Q) for steel? O SMC(Q)=27Q+ 4Q O SMC(Q)=27Q+ 400 O SMC(Q)=27Q+ 4 O SMC(Q)=27Q+ 400Q
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