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 | First Unit of Pollution (Dollars) | Second Unit of Pollution (Dollars) | Third Unit of Pollution (Dollars) ||--------|-----------------------------------|------------------------------------|----------------------------------|| Firm X | 90 | 125 | 180 || Firm Y | 55 | 70 | 110 || Firm Z | 650 | 800 | 1,500 |Now, imagine that two government employees proposed alternative plans for reducing pollution by 6 units.**Method 1: Regulation**The first government employee suggests limiting pollution through regulation. To meet the pollution goal, the government requires each firm to reduce its pollution by 2 units.Complete the following table with the total cost to each firm of reducing its pollution by 2 units.**Total Cost of Eliminating Two Units of Pollution**| Firm | Total Cost (Dollars) ||--------|---------------------|| Firm X | || Firm Y | || Firm Z | | **Method 2: Tradable Permits**The government is using a different strategy to cut pollution levels from 12 units to 6 units by issuing pollution permits at a price of $498 each. Firms can buy/sell permits. Suppose Firm Z, which finds cost reduction expensive, considers buying a permit. Evaluate the proposed prices for which trading is feasible:- $109- $149- $170- $579- $729The price of $498 is the permit's trading price.**Table: Firm Permit Actions and Pollution Levels**| Firm | Initial Pollution Permit Allocation (Units) | Action | Final Amount of Pollution Eliminated (Units) | Cost of Pollution Reduction (Dollars) ||------|----------------------------------------------|------------------------|---------------------------------------------|---------------------------------------|| Firm X | 2 | ➔ (Selling or Buying) | | || Firm Y | 2 | ➔ (Selling or Buying) | | || Firm Z | 2 | ➔ (Selling or Buying) | | |**Regulation Versus Tradable Permits**Evaluate the total cost of reducing pollution to 6 units using regulation and tradable permits:| Proposed Method | Total Cost of Eliminating Six Units of Pollution ||---------------------------|--------------------------------------------------|| Regulation | (Dollars) || Tradable Permits | (Dollars) |**Conclusion**Determine if tradable permits or government-regulated reduction costs are lower.

The government tried to reduce pollution that takes place due to various production and consumption…

Answered: unit of pollution. For each firm,…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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What type of market failure would you categorize marine pollution? b. Suggest a relevant Government policy that would yeild the efficient outcome and explain the process through which the implementation of the policy will lead to optimal out come. c. How will the imposition of the chosen government policy impact consumer surplus, producer surplus and total surplus as it relates to marine pollution.
8. Preblems and Applications QB Suppose that the government decides to issue trachble permits for a certain form of pollution. In terms of economic efficiency in the market for pothition, having the governmerk ayction the permits off is detributing them to firmi. True or Falsen If the government chostes to divtribute the permits, the alocation of permits among firms does not matter for efficiency, but is would affect the distribuen of wealth True False
Only typed answer You are an industry analyst that specializes in an industry where the market inverse demand is P = 100 - 3Q. The external marginal cost of producing the product is MCExternal = 6Q, and the internal cost is MCInternal = 14Q. Instruction: Round your answers to the nearest two decimal places. a. What is the socially efficient level of output? units b. Given these costs and market demand, how much output would a competitive industry produce? units c. Given these costs and market demand, how much output would a monopolist produce? units d. Which of the following are actions the government could take to induce firms in this industry to produce the socially efficient level of output. Instructions: You may select more than one answer. Click the box with a check mark for the correct answers and click twice to empty the box for the wrong answers. You must click to select or deselect each option in order to receive full credit. Pollution taxes…
500 450 The graph on the right may help in answering question 25 400 350 300 250 200 150 100 50 O 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 Quantity Demand MC Exter nality MC private MC Social A competitive tire manufacturing industry spews emissions into the air at47 per tire a marginal cost of 1.5-q, where q is the quantity of tires produced per month (in thousands). The industry marginal cost, excluding the cost of emissions (private marginal cost), is 4 + 4•q, expressed in $ per tire. The inverse demand curve for tires is p = 480 - 3-q, also expressed in $ per tire. In order to achieve the socially efficient level of tire production, which takes into account the optimal level of air pollution, the government levies a tax on the industry. What is the efficient pollution tax? $84 per tire $101 per tire $152 per tire Price
(1) Don Juan complains that the river has become polluted since a tobacco company X started operating four months ago and since then has been dumping its effluent in the river. The government endeavors to intervene by taxing company X but the former is not fully informed about the cost of pollution to the society and the cost of tax to the company. What should the government do to properly regulate water pollution?
4 This is a graph reprinted from Section 12.1 the Economics of Pollution. Please explain the graph with particular attention paid to why there are two supply curves. How can a government use this graph to establish pollution controls?
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Exhibit 30-2 Price and Cost 0,0₂ b) ABE. Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the private cost of expanding output from Q₁ to Q₂ is the area of a) Q₁CBQ2. Cuantity c) Q₁AEQ₂- d) Q₁ABQ₂.
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WHY SHOULD OTHER PECPLE BENEFIT FROM MY HARD WORK? 1994 Wateron De tyh e d Figure 1 Figure 1 shows how Calvin carefully avoids creating a positive externality (think of this as the equivalent of a factory applying a filter to eliminate any polluting emissions). Assume that this way of snow shovelling does not create any additional costs for Calvin (no extra effort and he has no plans to return home any time soon). b) As creating positive externalities leads to a social problem (see question a), and Calvin's way of snow shovelling avoids creating positive externalities, does Calvin's behaviour imply an efficiency improvement from a social point of view? Explain.
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Suppose that a firm’s emissions and Marginal Abatement Cost (MAC) data are summarized in thetable below. e MAC 0 200 10 180 20 160 30 140 40 120 50 100 60 80 70 60 80 40 90 20 100 0 a. If the price of a pollution permit is $100, how many permits will the firm need? Explain.b. Suppose that the price of a pollution permit increases to $120, how many permits will thefirm need? Explain.c. With this new price of $120, will the firm’s emissions increase or decrease? By howmuch? Explain.d. Can the firm sell any permits? If so, what is the revenue generated from permit sales?Explain.

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