The following questions use this scenario 3 Scenario 3A. There are three firms, A;B; and C that produce electricity. The first two firms have the same per-megawatt cost of production equal to $2, while firm C has a per-megawatt cost of $1. The firms differ, however, in their pollution. Firms A, B, andC produce respectively 1, 2, and 3 cubic feet of carbon monoxide per megawatt produced. A cubic foot of carbon monoxide pollutes the environment, and has a social cost of $2.5. The demand for electricity is represented by the inverse demand function P (Mw) =100 - Mw, where Mw represents the megawatts consumed by the public. Suppose firms are not held accountable for the pollution they produce. Scenario 3B. Suppose now that the government can measure the amount of pollution issued by each firm, and suppose that the government constrains each firm to emit no more than 9 cubic feet of carbon monoxide. Scenario 3C Suppose that government allows firms to trade their permits to emit carbon monoxide. Your answers are numbers only, do NOT include symbols

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Your Question:

Use Scenario 3B. What is the competitive equilibrium price of electricity (under this constraint)

Use Scenario 3B. What is the competitive equilibrium quantity produced by each firm under this constraint?

 

Use Scenario 3C. What is the competitive price of a permit to emit 1 cubic foot of carbon monoxide?

Use Scenario 3C. How much electricity is produced after the permits are traded?

 

The following questions use this scenario 3
Scenario 3A. There are three firms, A;B; and C that produce
electricity. The first two firms have the same per-megawatt cost of
production equal to $2, while firm C has a per-megawatt cost of $1.
The firms differ, however, in their pollution. Firms A, B, andC
produce respectively 1, 2, and 3 cubic feet of carbon monoxide per
megawatt produced. A cubic foot of carbon monoxide pollutes the
environment, and has a social cost of $2.5. The demand for
electricity is represented by the inverse demand function P (Mw)
=100 - Mw, where Mw represents the megawatts consumed by the
public. Suppose firms are not held accountable for the pollution they
produce.
Scenario 3B. Suppose now that the government can measure the
amount of pollution issued by each firm, and suppose that the
government constrains each firm to emit no more than 9 cubic feet
of carbon monoxide.
Scenario 3C Suppose that government allows firms to trade their
permits to emit carbon monoxide.
Your answers are numbers only, do NOT include symbols
Transcribed Image Text:The following questions use this scenario 3 Scenario 3A. There are three firms, A;B; and C that produce electricity. The first two firms have the same per-megawatt cost of production equal to $2, while firm C has a per-megawatt cost of $1. The firms differ, however, in their pollution. Firms A, B, andC produce respectively 1, 2, and 3 cubic feet of carbon monoxide per megawatt produced. A cubic foot of carbon monoxide pollutes the environment, and has a social cost of $2.5. The demand for electricity is represented by the inverse demand function P (Mw) =100 - Mw, where Mw represents the megawatts consumed by the public. Suppose firms are not held accountable for the pollution they produce. Scenario 3B. Suppose now that the government can measure the amount of pollution issued by each firm, and suppose that the government constrains each firm to emit no more than 9 cubic feet of carbon monoxide. Scenario 3C Suppose that government allows firms to trade their permits to emit carbon monoxide. Your answers are numbers only, do NOT include symbols
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