Suppose the aggregate MAC function is 100 - 20W and aggregate MD = 5W for a polluting industry. 1. Here the slopes of MAC and MD are equal in absolute value. Suppose instead that the slope of the MD function is greater than the slope of the MAC function. What would then be the preferred policy if there was asymmetric information about MAC? A. Emissions tax B. Emissions standard C. No regulation D. None of the above
Suppose the aggregate MAC function is 100 - 20W and aggregate MD = 5W for a polluting industry.
1. Here the slopes of MAC and MD are equal in absolute value. Suppose instead that the slope of the MD function is greater than the slope of the MAC function. What would then be the preferred policy if there was asymmetric information about MAC?
A. Emissions tax
B. Emissions standard
C. No regulation
D. None of the above
2. Suppose an emissions standard is being considered to achieve the socially optimal emissions level. What would be the total costs that the polluting industry avoids if the regulator decided not to regulate the firm and leave the market as is?
A. 0
B. 150
C. 50
D. 10
3. What are total damages that would be avoided if in fact the regulator used an emissions standard to achieve the socially optimal level of emissions?
A. 62.5
B. 40
C. 12.5
D. None of the above
4. What are net benefits at the optimal level of emissions using the "abatement cost perspective'' ?
A. 200
B. 150
C. 20
D. 1000
5. What would the polluting industry's total abatement costs equal if it faced an emissions tax rate equal to 20 dollars per unit emitted?
A. 60
B. 20
C. 10
D. 0
6. What are the total costs to the polluting industry if the regulator used an emissions subsidy to achieve the socially optimal level of emissions?
A. -20
B. 0
C. -10
D. 10
7. What are total costs to the polluting industry when a regulator uses an emissions standard to achieve the socially optimal level of emissions?
A. 0
B. 150
C. 50
D. 10
8. What are total costs to the polluting industry when a regulator uses an emissions tax to achieve the socially optimal level of emissions?
A. 80
B. 10
C. 90
D. None of the above
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