Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 16, Problem 16.6IP
a)
To determine
The likely bargaining negotiation outcome.
b)
To determine
The post-merger bargaining outcome.
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d-f
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4. Consider two polluting firms, with the marginal abatement costs of polluters 1 and 2,
respectively, equal to
MAC₁ = 20-E1
MAC2 = 12-E2
a. What is the unregulated level of pollution for each firm?
b. Assume policymakers have decided to cut the level of pollution in half. The way they
intend to accomplish this goal is to require both firms to cut their pollution in half. What
are the total costs of abatement from the policy? And how are these costs distributed
between the firms?
c. Is this uniform quota on emissions across firms the most cost-effective manner in which
to reduce emissions by 50%?
Chapter 16 Solutions
Managerial Economics: A Problem Solving Approach
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