Suppose there are two manufacturers of Electronics, Samsung and LG. When producing electronics, both of these companies emit pollution into the air. Currently each company emits 50 tons of pollution into the atmosphere. The government has recently introduced a policy to limit the amount of pollution these companies can omit by only giving them 25 pollution permits each. Each permit can be used to emit 1 ton of pollution or it can be sold to another manufacturer. For Samsung to reduce pollution it would cost $120 per ton of pollution, while for LG it would cost $40 per ton of pollution. If two companies decide to exchange permits with each other, what would we expect to happen? Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer. a b с d Samsung and LG will emit 25 tons of pollution each. LG will no longer pollute and Samsung will not lower the amount it pollutes. Samsung will no longer pollute and LG will not lower the amount it pollutes. We could expect no changes in pollution.

Suppose there are two manufacturers of Electronics, Samsung and LG. When producing electronics, both of these companies emit pollution into the air. Currently each company emits 50 tons of pollution into the atmosphere. The government has recently introduced a policy to limit the amount of pollution these companies can omit by only giving them 25 pollution permits each. Each permit can be used to emit 1 ton of pollution or it can be sold to another manufacturer. For Samsung to reduce pollution it would cost $120 per ton of pollution, while for LG it would cost $40 per ton of pollution. If two companies decide to exchange permits with each other, what would we expect to happen? Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer. a b с d Samsung and LG will emit 25 tons of pollution each. LG will no longer pollute and Samsung will not lower the amount it pollutes. Samsung will no longer pollute and LG will not lower the amount it pollutes. We could expect no changes in pollution.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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8.1 Suppose we have an agricultural valley 100 km by 50 km, with a polluting electricity power plant. The power plant causes pollution problems in a narrow strip of land downwind of the plant, and within this valley. 10 km in length and 500 m in width, but no problems outside of that area. The total effect of the pollution is to make crop land less productive. If we were to clean up the pollution, would we expect land prices to increase? Where? Would we expect wages to decline? Would the changes in land prices and/or wages fully reflect the benefits of cleaning up the pollution? Why or why not?
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There are three industrial firms in a town Firm Initial Pollution Level Cost of Reducing Pollution by 1 Unit A 30 units $20 40 units 20 units B с $30 $10 The government wants to reduce pollution to 60 units, so it gives each firm 20 tradable pollution permits. 1. Who sells permits and how many do they sell? Who buys permits and how many do they buy? Briefly explain why the sellers and buyers are each willing to do so. What is the total cost of pollution reduction in this situation? 2. How much higher would the costs of pollution reduction be if the permits could not be traded?
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In a market with 2 firms, the government has decided that 12 units of pollution must be abated and allocates each firm 6 units of pollution to abate. The total cost of pollution abatement for firm A is TCĄ = 9% and the total cost of pollution abatement for firm B is TCB B. If a market for pollution abatement was created, how much pollution would each firm abate in equilibrium? Firm A: 11 units; Firm B: 1 units O Firm A: 6 units; Firm B: 6 units Firm A: 4 units; Firm B: 8 units O Firm A: 1 units; Firm B: 11 units Firm A: 8 units; Firm B: 4 units
Suppose the the government has set the trading price of a permit at $126 per permit. 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 Firm A Firm B Firm C Initial Pollution Permit Allocation (Units of pollution) 2 2 2 Regulation Versus Tradable Permits Action Proposed Method Regulation Tradable Permits Final Amount of Pollution Eliminated (Units of pollution) Cost of Pollution Reduction (Dollars) Determine the total cost of eliminating six units of pollution using both methods, and enter the amounts in the following table. (Hint: You might need to get information from previous tasks to complete this table.) Total Cost of Eliminating…
Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, 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 two methods: Available Methods to Reduce Pollution 1. 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 to eliminate each unit of pollution. For each firm, assume that the cost of reducing pollution to zero (that is, eliminating all 4 units of pollution) is prohibitively expensive. Firm Cost of Eliminating the... First Unit of Pollution Second Unit of Pollution Third Unit of Pollution (Dollars) (Dollars) (Dollars) Firm X 90 125 180…
Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, 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 two methods: Available Methods to Reduce Pollution 1. 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 to eliminate each unit of pollution. For each firm, assume that the cost of reducing pollution to zero (that is, eliminating all 4 units of pollution) is prohibitively expensive. Firm Cost of Eliminating the... First Unit of Pollution Second Unit of Pollution Third Unit of Pollution (Dollars) (Dollars) (Dollars) Firm X 130 165 220…
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Now assume that Super Polluter faces competition with the entrant of a new firm, Reducing our Footprint, Inc. The two fırms together split the market and total production, so now they are together emitting 80 tons of carbon dioxide (40 tons each). The EPA sets a goal to reduce these emissions by 40 tons, so they issue pollution permits for the remaining 40 tons only (20 to each firm). The costs of pollution reduction for both firms are shown in the graph below. Pollution Reduction Costs per Unit MCRSP $1,000 MCRROE $400 $300 A В ROF 0 5 10 15 20 25 30 35 40 SP 40 35 30 25 20 15 10 Units of Pollution Reduced • What does it cost Super Polluter (SP) to reduce emissions this time? How about Reducing our Footprint (ROF)? • Assuming the pollution permits are tradable, and the cost of a permit settles at $400, how much will Super Polluter and Reducing our Footprint each reduce their pollution? • Including permit costs/income, what will it cost them? • How much does each firm save relative to…