Gen Combo Managerial Economics & Business Strategy; Connect Access Card
9th Edition
ISBN: 9781260044294
Author: Baye
Publisher: MCG
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Question
Chapter 8, Problem 4CACQ
(A)
To determine
(B)
To determine
Maximum profits achieved is to be explained.
(C)
To determine
Whether
(D)
To determine
Price quantity combination maximizes revenue is to be ascertained.
(E)
To determine
Maximum revenue is to be calculated.
(F)
To determine
Whether demand is elastic, inelastic or unit elastic at the revenue maximizing price quantity combination is to be explained.
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Section 1
Answer all questions. Show all your workings.
(a) Suppose there are two firms 1 and 2, whose abatement costs
are given by c₁(e₁) and c₂ (e₂), where e denotes emissions and
subscripts denote the firm.
We assume that c{(e;) 0 for i = 1,2 and for any
level of emission e we have c₁'(e) # c₂'(e).
Furthermore, assume the two firms make different contributions
towards pollution concentration in a nearby river captured by the
transfer coefficients ε₁ and 2 such that for any level of emission
e we have 2(e) +2 The regulator does not know the resulting
C₁'(e) Τι
environmental damages. Using an analytical approach explain
carefully how the regulator may limit the concentration of
pollution using (i) a Pigouvian tax scheme and (ii) uniform
emissions standards. Discuss the cost-effectiveness of both
approaches to control pollution.
[200 marks]
(b) "Whether the regulator sells or gives away tradeable emission
permits free of charge, the quantities of emissions produced by
firms are the…
Chapter 8 Solutions
Gen Combo Managerial Economics & Business Strategy; Connect Access Card
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