Two coal-burning electric power plants are emitting mercury which impairs cognitive development in children. Plant A's marginal abatement cost is MCA= 1.2q and plant B's marginal abatement cost is MCB = 0.3q. Each firm initially emits 50 units and the EPA would like to reduce total emissions to 40. If the EPA follows a command-and-control policy and tells each firm to abate by the same amount, what will be the total costs? If firms could trade permits, what would happen to total costs? Why?

When businesses are obliged to eliminate and/or reduce unwelcome annoyances or harmful byproducts…

Answered: Two coal-burning electric power plants…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Two coal-burning electric power plants are emitting mercury which impairs cognitive development in children. Plant A's marginal abatement cost is MC_A= 1.2q and plant B's marginal abatement cost is MC_B = 0.3q. Each firm initially emits 50 units and the EPA would like to reduce total emissions to 40.

If the EPA follows a command-and-control policy and tells each firm to abate by the same amount, what will be the total costs?

If firms could trade permits, what would happen to total costs? Why?

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