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- MB = 50 - 2A MC = A Draw a graph for conducting a benefit cost analysis using marginal analysis. Solve for the efficient level of abatement and calculate the net benefits. Solve for the deadweight loss present at A = 10.QUESTION 3 Suppose that the MD=5E and with its current technology, the firm's MS is given by MS₂ = 200-5E. g. Determine the socially optimal level of emissions E.Describe the key symmetry between a pollution emissions tax and an emissions trading scheme. Outline some reasons you might wish to choose one approach in favour of the other when dealing with an emissions-reduction problem.
- Consider the decision to adopt a dog. Describe aprivate cost, a private benefit, an external cost, andan external benefit that result from your decisionto adopt a dog.The supply and demand of sugar are given as Qs = 5P, Qd = 250- P where Qs is tons supplied per year, P is the price per ton; Qd is tons demanded per year. Because of the pollution associated with production, marginal external costs of 40 are associated with each ton of sugar. Assuming that sugar is sold in a competitive market, What is the market price? How many tons of paper will be produced per year at that price? What is the efficient output of paper? What is the amount of total Pigouvian tax to achieve efficiency? What is the amount of total Pigouvian subsidy to achieve efficiency?The supply and demand of sugar are given as Qs = 5P, Qd = 250- P where Qs is tons supplied per year, P is the price per ton; Qd is tons demanded per year. Because of the pollution associated with production, marginal external costs of 40 are associated with each ton of sugar. Assuming that sugar is sold in a competitive market, What is the market price? How many tons of paper will be produced per year at that price? What is the efficient output of paper? What is the amount of total Pigouvian tax to achieve efficiency? What is the amount of total Pigouvian subsidy to achieve efficiency?
- give an example of efficient (market failure) isuue that arises in working toward a global agreement to limit greenhouse gas emissions.$ 15 7 0 Marginal Control Costs A 50 0 150 Marginal Damages 250 Emissions (tons) | What is the benefit to society from reducing emissions from 250 tons to 150 tons?In most economic sectors waste is oversupplied. Explain why this is the case and critically discuss the use of economic principles to move the supply of waste to a more sustainable and efficient level.
- No hand written solution Afirm has an industrial plant that emits pollutants into a town’s lake. The plant’s marginal abatement function is MAC= 200 – 0.5E and damages caused by its emissions are given by MD = 2E where emissions are in kg. per day. What is the socially efficient level of emissions from this plant? Illustrate this in a graph. As an incentive to reduce emissions to the socially efficient level, government offers to pay the firm for each kg. of emissions it abates per day from this plant. What subsidy per kg. should the government offer? If the plant abates to the socially efficient level of emissions, what total subsidy payment would the firm receive? Identify the area in your graph. How much better or worse off would the firm be compared to if it did no abating? Identify the area in your graph. What would be the net benefit to society if we pay the firm to reduce the plant’s emissions to the socially efficient level? Identify this area in your graph.Lecture: Externality - Pigou8. All-Leather is a tanning company located on Lake Michigan in Chicago. Its total cost functionis C(QA) = 125 + 8QA + 5QA2, where QA is leather production per week in thousands of pounds.a) If leather sells for $408 per thousand pounds, how much leather will All-Leather produce?How much profit does All-leather earn?Enjoy is a beverage company located on Lake Michigan near All-Leather in Chicago. Enjoy’sproduction of beverages is negatively affected by water pollution from All-Leather’s productionof leather. Enjoy’s total cost function to produce beverages isC(QE) = 10QE +3QE2 + 3QA2where QE is Enjoy’s weekly production of beverages, in thousandsof gallons and, as above, QA is All-Leather’s weekly production of leather.b) Is this an example of a pecuniary externality or a real externality? Explain.c) What is the extra cost to Enjoy from an additional thousand tons of leather production by AllLeather (i.e., the external marginal cost of an extra unit of QA…To model the effects of a carbon tax on CO2 emissions, policymakers study the marginal cost of abatement B(x), defined as the cost of increas- ing CO2 reduction from x to x +1 tons (in units of ten thousand tons- Figure 4). Which quantity is represented by the area under the curve over [0, 3] in Figure 4? B(x) ($/ton) 100 75 50+ 25- 1 3 Tons reduced (ten thousands) FIGURE 4 Marginal cost of abatement B(x).