Suppose there are two firms 1 and 2, whose abatement costsare given by c₁ (e₁) and C2 (е2), where e denotes emissions andsubscripts denote the firm.We assume that c{(e) < 0; c'(e) > 0 for i = 1,2 and for anylevel of emission e we have c₁'(e) # c₂' (e).Furthermore, assume the two firms make different contributionstowards pollution concentration in a nearby river captured by thetransfer coefficients ε₁ and 2 such that for any level of emissione we have C₂'(e)# The regulator does not know the resultingC₁'(e) Τιenvironmental damages. Using an analytical approach explaincarefully how the regulator may limit the concentration ofpollution using (i) a Pigouvian tax scheme and (ii) uniformemissions standards. Discuss the cost-effectiveness of bothapproaches to control pollution.

2. Pigouvian Tax SchemeA Pigouvian tax imposes a tax t per unit of emissions. Firms minimize their…

Answered: Suppose there are two firms 1 and 2,…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider an industry with two firms that emit a uniformly mixed air pollutant (e.g., carbon dioxide). The marginal abatement cost functions for Firm 1 and Firm 2 are: MAC1 = 100-e1 MAC2 = 100-4e2 Aggregate emissions for the industry are denoted as E = e1 + e2. [1] In an unregulated environment how many units of emissions does each firm emit? Firm 1’s unregulated level of emissions: Firm 2’s unregulated level of emissions: Total unregulated level of emissions: Suppose a regulator has a goal of reducing the total level of emissions from the amount from the amount you answered in [1] to 25 units. The regulator would like to achieve the goal of 25 units of total emissions in a cost-effective way. To do so it issues 25 permits, 10 are given to Firm 1 and 15 are given to Firm 2. A firm can only emit a unit of pollution if they have a permit for that unit, otherwise they must abate. After the permits are allocated, firms are allowed to buy or sell…
Consider an industry with two firms that emit a uniformly mixed air pollutant (e.g., carbon dioxide). The marginal abatement cost functions for Firm 1 and Firm 2 are: MAC1 = 100 - e1 MAC2 = 100 - 4e2 Aggregate emissions for the industry are denoted as E = e1 + e2. [1] In an unregulated environment how many units of emissions does each firm emit? Firm 1’s unregulated level of emissions ____________ Firm 2’s unregulated level of emissions ____________ Total unregulated level of emissions ______________
C Consider two polluting firms with the following marginal savings functions; MS, = 20 - e, for firm 1 MS2 = 40 – 2e, for firm 2 Where e and ez are emission levels for firm 1 and 2, respectively. a. Sketch the MS functions on a diagram. b. Derive the total MS function. Draw it on your diagram above. c. The regulator would like to reduce the level of total emissions by 60% from their unregulated level. What is the total reduction in emissions needed? i. If the regulator decides emissions be cut using equiproportionate reduction, how much is each firm required to reduce? Explain whether this would be a cost-effective way to reduce emissions?
suppose the regulator imposes a Pigouvian tax on each unit of emissions. Calculate each firm's emissions level and the total tax collected.
Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC1 = 30 - 6E1 MAC2 = 20 - 10E2. If both firms cut their emissions to zero, then total abatement costs (TAC) for the two firms is ____. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
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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 be MAC = 4 - 0.5E. If the government raises the tax on emissions from $1 to $3, then the benefits of adopting new technologies increase by $_. (Hint: when not considering adoption costs, benefits are simply defined by changes in total compliance costs.) Please round your final answer to two decimal places if necessary. Answer:
Suppose that Penn Products and Teller Industries are both emitting 30 metric tons of perfluorocarbons (PFCs) into the atmosphere. Regulators wish to reduce emissions to 40 metric tons overall, and plan to achieve this with a system of tradable permits. Penn’s marginal abatement costs are given by MACP = 5eP, where eP is the number of metric tons of emissions that Penn is cutting. Thus, the cost of cleaning up the first metric ton is $5, the second ton costs $10 to clean up, and so on. Teller’s marginal abatement costs are given by MACT = 7.5eT, where eT is the number of metric tons of emissions that Teller cuts. a. The lowest-cost way to reduce emissions is found when both firms’ marginal abatement costs are equalized. Equate Penn’s and Teller’s marginal abatement costs, and solve for eP in terms of eT. For each metric ton that Teller cuts, how many tons should Penn cut? b. Because 20 metric tons are to be cut, we know that eP + eT = 20. Use your…
There are two towns, A and B, each with a plant emitting pollution. The emission from plant Ais uniformly distributed across both town A and B. The emissions from plant B are local to town B. Despite the difference in affected area, the marginal benefit to either town of abating one unit of pollution from either source is the same, MB(Qi) = 17 − Qi per person, where Qi is total emissions abated from town i’s air. The marginal cost of abatement at plants A and B are MCA(qA) = 200qA and MCB(qB) = 100qB, respectively. If town A has 300 citizens and town B has 200, what is the efficient tax to set at each plant?
Following are the marginal abatement costs of three firms . Suppose each firm is currently emitting 10 tons / week , so the total emissions are 30 tons / week . Suppose we wish to reduce total emissions by 50 % , to 15 tons per week . The following table provides marginal abatement costs for each firm . a ) What is the total cost if each firm cuts total emission by 50 % from their current levels . b ) What is the total cost if the total emissions decrease by 50 % ( to 15 tons per week ) that meets the equi - marginal principle . c ) From the society's point , which method of reducing ( a or b above ) emissions is better ? Provide a reason .
Consider two polluting firms with the following marginal savings functions; MS1 = 20 - e1 for firm 1 MS2 = 40 – 0.5e2 for firm 2 Where e1 and e2 are emission levels for firm 1 and 2, respectively. A. Sketch the MS functions on a diagram. B. Derive the total MS function. Draw it on your diagram above. C. The regulator would like to reduce the level of total emissions by 60% from their unregulated level. What is the total reduction in emissions needed? i. If the regulator decides emissions be cut using equiproportionate reduction, how much is each firm required to reduce? Explain whether this would be a cost-effective way to reduce emissions? ii. If instead the regulator decides to use an emission fee, what level should the fee be set to achieve the desired level of emissions? How much would each firm emit? Illustrate your answer on the diagram above. iii. In (ii) above, do the firms emit different amounts in the presence of the emission fee? Does it make sense that they should…

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