Suppose 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 PollutionThird Unit of Pollution(Dollars)(Dollars)Firm(Dollars)Firm X6080120Firm Y5006751,100Firm Z75100160Now, imagine that two government employees proposed alternative plans for reducing pollution by 6 units.Method 1: RegulationThe first government employee suggests limiting pollution through regulation. To meet the pollution goal, the government requires each firm to reduceits pollution by 2 units.Complete the following table with the total cost to each firm of reducing its pollution by 2 units.Total Cost of Eliminating Two Units of PollutionFirm(Dollars)Firm X140Firm Y1,175Firm z175 Method 2: Tradable PermitsMeanwhile, the other employee proposes using a different strategy to achieve the government's goal of reduding polution in the area from 12 units to6 units. This employee suggests that the government issue two polution permits to each firm. For each permit a firm has in its passession, it can emit1 unit of pollution. Firms are free to trade polution permits with one another (that is, buy and sell them) as long as both firms can agree on a price.For example, fierm 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 polution by only 1 unit while firm X would end up with only one permit and would have to reduce its polution by 3 units. Assume the negotiationand exchange of permits are costiess.Because firm Y has high polution-reduction costs, it thinks it might be better off buying a permit from firm X and a permit from firm 2 so that itdoesn't have to reduce its own polution emissions. At which of the following prices are both firm X and firm 2 willing to sell one of their permits tofirm Y? Check al that apply.O st14O s138O s144O s279O s636Suppose the the government has set the trading price of a permit at $126 per permit.Complete the falowing table with the action each firm wil take at this permit price, the amount of polution cach firm will eliminate, and the amountiecosts each firm to reduce polution to the necessary level. If a firm is wiling to buy two permits, assume that it buys one permit fram each of theocher firms. (Hint: Do not include the prices paid far permits in the cost af reducing polution.)Initial Pollution PermitFinal Amount of PollutionCost of PollutionAllocationEliminatedReductionFirm(Units of pollution)Action(Units of pollution )(Dollars)Firm XFirm YFirm zRegulation Versus Tradable PermitsDetermine the total cost of eliminating six units of pallution using both methods, and enter the amounts in the folowing tabie. (Hint: You might needto get information from previous tasks to complete ths table.)Total Cost of Eliminating Six Units of PollutionProposed Method(Dollars)RegulationTradable PermitsIn this case, you can conclude that eliminating polution iscostly to society when the government distributes tradable permits than when itregulates each firm to eliminate a certain amount of polution.

Externalities refer to the part when the effect of manufacturing or consumption of products and…

Answered: Suppose the government wants to reduce…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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There are 2 firms: Firm X and Firm Y. Firm X has the following cost to pollution reduction: MCx = 10 + 2Qx Firm Y has the following cost to pollution reduction: MCy = 4 + 4Qy Both firms currently produce 100 units of pollution, for a combined production of 200 units. The government has decided to reduce total pollution to 56 units. To do this, the government introduces 56 tradable permits, giving 28 to each firm. What is the equilibrium price of each permit?
In the film, The Dark Water 2019, Ducont a huge chemical firm dumps it's waste in air, land and water knowing it's has harmful effects to humans and animal. In reference to the firm answer the set of questions below: (a) What is the cause of the externality in the 2019 film The Dark Water? Determine whether the Coase theorem applies in the film, if not, what results in the theorem breaking down?
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
Chapter 10 The first government employee suggests reducing pollution through regulation. To meet the pollution goal, the government requires each firm reduce its pollution by 2 units. Complete the following table with the total cost to each firm of reducing its pollution by 2 units. Firm Total Cost of Eliminating Two Units of Pollution (Dollars) Firm A Firm B Firm C ☐☐ Method 2: Tradable Permits Meanwhile, the other employee proposes using a different strategy to achieve the government's goal of reducing pollution in the area from 1 6 units. This employee suggests that the government issue two pollution permits to each firm. For each permit a firm has in its possession, i 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 For example, if firm A agrees to sell a permit to firm B at an agreed-upon price, then firm B would end up with three permits and would nee reduce its pollution by only 1 unit…
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
Two MSU fraternities, Phi Kappa Sigma and Phi Kappa Tau, are accustomed to each having 6 parties a month. Phi Kappa Sigma and Phi Kappa Tau are located close to each other on Bogue Street. These parties impose a negative externality on their other neighbors on Bogue Street. Suppose President Stanley decides that the socially optimal total number of parties on Bogue Street is 8 parties a month. The total benefits each fraternity derives from having a certain number of parties a month are given in the table below. Number of Parties 0 1 2 3 4 5 6 Phi Kappa Sigma's Total Benefits 0 300 500 650 700 740 775 Phi Kappa Sigma's Marg. Benefits Phi Kappa Tau's Total Benefits 0 250 475 650 750 825 850 Phi Kappa Tau's Marg. Benefits a) Suppose President Stanley decides to limit the total number of parties to 8 by issuing Phi Kappa Sigma 6 rights and Phi Kappa Tau 2 rights. Each right allows the fraternity to have one party. If these rights are allowed to be traded, how many rights will be sold? Who…
Complete the following Exercises. Use complete sentences. Consider two firms who each release 10 units of pollution initially, for a total of 20 units. Their supply curves for abatement are given below. These supply curves measure the marginal cost of abatement, or the cost of cleaning up each unit of pollution. For example, it costs firm 1 $40 to clean up (or abate) the 1st unit, $80 to clean up the 2nd unit, and so forth. Supply of Abatement UnitFirm 1Firm 2 1$ 40$ 36 2$80$56 3$120$76 4$160$96 5$200$116 6$240$136 7$280$156 8$320$176 9$360$196 10$400 $216 A.) Assume that the damages from the pollution are an external cost from the standpoint of the two firms. How many units will each abate? Why?Why are their marginal costs of abatement (supply curves) rising as they eliminate more pollution (i.e., as they get closer to zero units of pollution)? Now assume the Environmental Protection Agency has determined that the desired…

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