Use the following information to answer Questions 14 – 18. Consider an industry of 2 firms with the following marginal abatement cost functions: MAC1 = 300 – 30e1 MAC2 = 500 – 20e2 [14] What is the aggregate level of emissions without regulation? [15] How much should a regulator allow each firm to emit to limit aggregate emissions to 20 tons cost-effectively? Firm 1 _____ Firm 2 ________ [16] What tax should the regulator set to achieve an aggregate emissions level of 20? [17] Calculate the total abatement cost for both firms of reaching the aggregate emissions level of 20 tons via the tax? Don’t include the tax payments. Firm 1’s Total Abatement Cost _______________ Firm 2’s Total Abatement Cost _______________ [18] Suppose you want to limit aggregate emissions to 20 tons with a competitive tradeable emissions permit system. If Firm 1 is given 5 permits and Firm 2 is given 15 permits, after trading how many permits will each firm end up with? Firm 1 _________ Firm 2 __________
Use the following information to answer Questions 14 – 18. Consider an industry of 2 firms with the following marginal abatement cost functions:
MAC1 = 300 – 30e1
MAC2 = 500 – 20e2
[14] What is the aggregate level of emissions without regulation?
[15] How much should a regulator allow each firm to emit to limit aggregate emissions to 20 tons cost-effectively?
Firm 1 _____ Firm 2 ________
[16] What tax should the regulator set to achieve an aggregate emissions level of 20?
[17] Calculate the total abatement cost for both firms of reaching the aggregate emissions level of 20 tons via the tax? Don’t include the tax payments.
Firm 1’s Total Abatement Cost _______________
Firm 2’s Total Abatement Cost _______________
[18] Suppose you want to limit aggregate emissions to 20 tons with a competitive tradeable emissions permit system. If Firm 1 is given 5 permits and Firm 2 is given 15 permits, after trading how many permits will each firm end up with?
Firm 1 _________ Firm 2 __________
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