"Whether the regulator sells or gives away tradeable emissionpermits free of charge, the quantities of emissions produced byfirms are the same."Assume that there are n identical profit-maximising firms whereprofit for each firm is given by π(e) with л'(e) > 0; π"(e) <0 and e denotes emissions. Individual emissions summed overall firms gives E which generates environmental damagesD(E). Show that the regulator achieves the optimal level of totalpollution through a tradeable emission permit scheme, wherethe permits are distributed according to the following cases:Case (i) the firm purchases all permits;Case (ii) the firm receives all permits free; andPage 3 of 5ES30031Case (iii) the firm purchases a portion of its permits and receivesthe remainder free of charge.

Step 1:The optimal level of emissions refers to the amount of pollution or greenhouse gas emissions…

Answered: "Whether the regulator sells or gives…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. A firm's marginal abatement cost function is given by MAC = 200-5E. Suppose that, after adopting new abatement technology, the firms marginal abatement function becomes MAC = 160-4E. Costs are in dollars per tonne and emissions are in tonnes per year. The firm is given %3D 20 tradeable pollution permits (each permit allows it to emit one tonne of pollution) and the current market price per permit is $100. a)Given no change in the permit price how many tonnes of pollution will the firm emit? b)What will be the firms total abatement cost? Will it buy or sell permits and how many? c) What will be the net cost to the firm after trading? What will be the net gain to the firm from adopting the new abatement technology
C Consider two polluting firms with the following marginal savings functions; MS, = 20 - e, for firm 1 MS2 = 40 – 2e, for firm 2 Where e and ez are emission levels for firm 1 and 2, respectively. a. Sketch the MS functions on a diagram. b. Derive the total MS function. Draw it on your diagram above. c. The regulator would like to reduce the level of total emissions by 60% from their unregulated level. What is the total reduction in emissions needed? i. If the regulator decides emissions be cut using equiproportionate reduction, how much is each firm required to reduce? Explain whether this would be a cost-effective way to reduce emissions?
cap-and-trade and windfall profitsA city called Seoul is suffering from high concentrations of mercury in the air, caused by burningcoal in power plants. There are two of these plants close to the city. The city’s mayor wants touse cap-and-trade to reduce emissions to a reportedly “safe” level of 60 tons. The two firms havethe following marginal benefits of emissions: MB1 = 100 – 2e1, MB2 = 25 – 0.5e2.a. How much mercury will each firm emit? What allowance price will prevail in themarket?Firm 2 hires a smart lobbyist who convinces the government that its profits are relatively low andthat it therefore deserves a generous allowance allocation. The government agrees and allocatesa1 = 20 allowances to firm 1 (for free) and a2 = 40 allowances to firm 2 (for free).b. What are the firms’ profits? Do any of the firms earn windfall profits? [Hint: compareprofits with and without regulation.] Windfall profits have been sharply criticized by consumer advocacy groups and politicians.c. What can…
(1) Two firms (A and B) that produce timber products pollute a local forest with pesticides used to grow trees. Currently, firm A releases 100 pounds of pesticide waste into the forest per month, while firm B releases 140 pounds of pesticide waste into forest per month. The table below shows the cost of reducing pesticide waste by increments of 10 pounds for each firm. For each firm, reductions beyond 50 pounds would be virtually impossible to accomplish and expensive if it is to stay in business, because some pesticide must be used. Total cost of reducing Firm A pesticide waste by 10 pounds 20 pounds 30 pounds 40 pounds 50 pounds Firm B $6 $4 $18 $12 $36 $24 $60 $40 $90 $64 Suppose the government wants to reduce pesticide waste level to 180 pounds. That is, the government wants to reduce pesticide waste from its current monthly level to 180 pounds per month. To achieve this goal, the government decides to issue permits to pollute. A total of 18 permits are issued, where each permit…
Now assume that Super Polluter faces competition with the entrant of a new firm, Reducing our Footprint, Inc. The two fırms together split the market and total production, so now they are together emitting 80 tons of carbon dioxide (40 tons each). The EPA sets a goal to reduce these emissions by 40 tons, so they issue pollution permits for the remaining 40 tons only (20 to each firm). The costs of pollution reduction for both firms are shown in the graph below. Pollution Reduction Costs per Unit MCRSP $1,000 MCRROE $400 $300 A В ROF 0 5 10 15 20 25 30 35 40 SP 40 35 30 25 20 15 10 Units of Pollution Reduced • What does it cost Super Polluter (SP) to reduce emissions this time? How about Reducing our Footprint (ROF)? • Assuming the pollution permits are tradable, and the cost of a permit settles at $400, how much will Super Polluter and Reducing our Footprint each reduce their pollution? • Including permit costs/income, what will it cost them? • How much does each firm save relative to…
suppose the regulator imposes a Pigouvian tax on each unit of emissions. Calculate each firm's emissions level and the total tax collected.
Give only typing answer with explanation and conclusion Suppose there are two industries with MAC functions as follows: MACA = 240-3EA and MACB=160-2EB And suppose the local government wished to reduce the total industry emissions by 50% (from the uncontrolled level) by implementing a uniform standard. How much emission would be reduced and what would be the total abatement costs for each industry under this uniform standard?
Answer the last que
Consider an industry with two firms that emit a uniformly mixed air pollutant (e.g., carbon dioxide). The marginal abatement cost functions for Firm 1 and Firm 2 are: MAC1 = 100-e1 MAC2 = 100-4e2 Aggregate emissions for the industry are denoted as E = e1 + e2. [1] In an unregulated environment how many units of emissions does each firm emit? Firm 1’s unregulated level of emissions: Firm 2’s unregulated level of emissions: Total unregulated level of emissions: Suppose a regulator has a goal of reducing the total level of emissions from the amount from the amount you answered in [1] to 25 units. The regulator would like to achieve the goal of 25 units of total emissions in a cost-effective way. To do so it issues 25 permits, 10 are given to Firm 1 and 15 are given to Firm 2. A firm can only emit a unit of pollution if they have a permit for that unit, otherwise they must abate. After the permits are allocated, firms are allowed to buy or sell…
Consider an industry with two firms that emit a uniformly mixed air pollutant (e.g., carbon dioxide). The marginal abatement cost functions for Firm 1 and Firm 2 are: MAC1 = 100 - e1 MAC2 = 100 - 4e2 Aggregate emissions for the industry are denoted as E = e1 + e2. [1] In an unregulated environment how many units of emissions does each firm emit? Firm 1’s unregulated level of emissions ____________ Firm 2’s unregulated level of emissions ____________ Total unregulated level of emissions ______________
Consider two polluting firms with the following marginal savings functions; MS1 = 20 - e1 for firm 1 MS2 = 40 – 0.5e2 for firm 2 Where e1 and e2 are emission levels for firm 1 and 2, respectively. A. Sketch the MS functions on a diagram. B. Derive the total MS function. Draw it on your diagram above. C. The regulator would like to reduce the level of total emissions by 60% from their unregulated level. What is the total reduction in emissions needed? i. If the regulator decides emissions be cut using equiproportionate reduction, how much is each firm required to reduce? Explain whether this would be a cost-effective way to reduce emissions? ii. If instead the regulator decides to use an emission fee, what level should the fee be set to achieve the desired level of emissions? How much would each firm emit? Illustrate your answer on the diagram above. iii. In (ii) above, do the firms emit different amounts in the presence of the emission fee? Does it make sense that they should…
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