Suppose there are pulp and paper mills that release carbon dioxide emissions (CO₂) into air at their current production levels. Each firm currently emits 10 tons per year, thus emitting 20 tons total. Local authorities have decided they would like to reduce annual CO₂ pollution to 10 tons per year (thus a 10 ton reduction) via a cap-and-trade policy. The mills have different marginal abatement costs given by the following equations: MACX 3ax MACY = ay whereby ax and ay correspond to the marginal abatement quantities chosen by firms X and Y respectively. (a) Plot the marginal abatement functions for each firm on one overlapping graph that rep-
Suppose there are pulp and paper mills that release carbon dioxide emissions (CO₂) into air at their current production levels. Each firm currently emits 10 tons per year, thus emitting 20 tons total. Local authorities have decided they would like to reduce annual CO₂ pollution to 10 tons per year (thus a 10 ton reduction) via a cap-and-trade policy. The mills have different marginal abatement costs given by the following equations: MACX 3ax MACY = ay whereby ax and ay correspond to the marginal abatement quantities chosen by firms X and Y respectively. (a) Plot the marginal abatement functions for each firm on one overlapping graph that rep-
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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