Suppose that a firm's marginal abatement cost function with existing technologies is MAC = 8 - E. If the firm adopts new pollution abatement technologies, then its marginal abatement cost function will become MAC = 4 - 0.5E. Moreover, assume that the adoption costs for the new technologies are $3. If the government raises the tax on emissions from $1 to $3, then the firm's total costs increase by $__. (Hint: total costs are different from total compliance costs. Total compliance costs are the sum of TAC and tax payment, while total costs are the sum of total compliance costs and adoption costs (remember that adoption costs are only incurred if the firm actually decides to adopt the new technology).) Please round your final answer to two decimal places if necessary. Answer:

Suppose that a firm's marginal abatement cost function with existing technologies is MAC = 8 - E. If the firm adopts new pollution abatement technologies, then its marginal abatement cost function will become MAC = 4 - 0.5E. Moreover, assume that the adoption costs for the new technologies are $3. If the government raises the tax on emissions from $1 to $3, then the firm's total costs increase by $__. (Hint: total costs are different from total compliance costs. Total compliance costs are the sum of TAC and tax payment, while total costs are the sum of total compliance costs and adoption costs (remember that adoption costs are only incurred if the firm actually decides to adopt the new technology).) Please round your final answer to two decimal places if necessary. Answer:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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No hand written solution Afirm has an industrial plant that emits pollutants into a town’s lake. The plant’s marginal abatement function is MAC= 200 – 0.5E and damages caused by its emissions are given by MD = 2E where emissions are in kg. per day. What is the socially efficient level of emissions from this plant? Illustrate this in a graph. As an incentive to reduce emissions to the socially efficient level, government offers to pay the firm for each kg. of emissions it abates per day from this plant. What subsidy per kg. should the government offer? If the plant abates to the socially efficient level of emissions, what total subsidy payment would the firm receive? Identify the area in your graph. How much better or worse off would the firm be compared to if it did no abating? Identify the area in your graph. What would be the net benefit to society if we pay the firm to reduce the plant’s emissions to the socially efficient level? Identify this area in your graph.
Suppose that a firm's marginal abatement cost function with existing technologies is MAC = 8 - E. If the firm adopts new pollution abatement technologies, then its marginal abatement cost function will become MAC = 4 - 0.5E. With an emissions tax of $2, the benefits of adopting the new technologies equal $_ Please round your final answer to two decimal places if necessary. Answer: