Imagine a firm’s marginal abatement cost function with existing technologies is: MAC = 8 – E....

Imagine a firm’s marginal abatement cost function with existing technologies is: MAC = 8 – E. If the firm adopts new pollution abatement technologies, its marginal abatement cost function will be: MAC = 4 – 0.5E. With a tax on emissions of $2, the benefits of adopting the new technologies equal: Select one: a. $4. b. $10. c. $2. d. $8.

Expert Solution

Rahul Sunny answered 2 years ago

For the following questions assume: Marginal Abatement Cost is MAC= 12 – E, and Marginal Damages...

For the following questions assume: Marginal Abatement Cost is MAC= 12 – E, and Marginal Damages is MD = E/2 Suppose the same polluter is operating under a regulatory environment such that the polluter always choses ESE (so the regulation updates as polluters innovate). The firm has the option of undertaking a technological innovation in abatement such that it would face MAC = 6 – E/2 after implementation. 9) What is the incentive to innovate (the net private benefit to...

Suppose a society has the following marginal abatement cost (MAC) and marginal damage (MD) functions MAC...

Suppose a society has the following marginal abatement cost (MAC) and marginal damage (MD) functions MAC = 140 – 4E MD = 3E Where E denotes the level of pollution. a) What is the unregulated level of pollution?

The steeper the marginal abatement cost function, the more a firm will reduce emissions in response...

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MAC = 90 – E and Marginal Damages is MD = 30 + 2E, where E...

MAC = 90 – E and Marginal Damages is MD = 30 + 2E, where E is measured in tonnes. 19) Suppose the Chemical Company owns the river. Begin by assuming there has not been any agreement. The Fishery offers the Chemical Company $50 per tonne of abatement, and the Chemical Company agrees. What will be resulting Net Social Benefit (NSB) of the agreement?

What must be true about the relationship between marginal abatement cost and marginal damage cost to...

What must be true about the relationship between marginal abatement cost and marginal damage cost to achieve the efficient level of pollution? While the efficient level can be defined in principle, why might policy instruments to obtain the efficient level be difficult to implement in practice?

1. Suppose that a competitive firm’s marginal cost function is given by MC(q) = 4 +...

1. Suppose that a competitive firm’s marginal cost function is given by MC(q) = 4 + aq, where a > 0 and the market price is 16. a) What is the firm’s profit-maximizing level of output when a = 4? b) Suppose the firm’s fixed costs increase and the value of a decreases. How will this affect the firm’s profit-maximizing level of output? c) Suppose the firm’s producer surplus at its profit-maximizing level of output is 36. What is the...

The aggregate MAC function for some polluter is given by MAC=200-2E, where E is measured in...

The aggregate MAC function for some polluter is given by MAC=200-2E, where E is measured in millions of tons, and the MD function is given by MD = 2E. Graph both functions and solve for the socially-efficient level of emissions. What size emissions tax per ton is needed to achieve the socially-efficient level of emissions? Explain. Compute the total tax bill and total abatement cost to polluters if they reduced their emissions to the socially-efficient level. What is the net...

Assume that the marginal abatement cost curves (MACs) are linear and that the firm currently faces...

Assume that the marginal abatement cost curves (MACs) are linear and that the firm currently faces a standard imposed at the optimal level of pollution. Suppose a new technology can be adopted at zero cost, which causes the MAC to swing downwards. Also, assume that if the firm adopts the technology, the regulator automatically adjusts the standard to its new optimal level. Under what conditions will the firm adopt the new technology?

Which do you think is easier, to estimate the marginal benefit or cost of abatement? What...

Which do you think is easier, to estimate the marginal benefit or cost of abatement? What are the implications if we are wrong?

The following equations describe a firm’s demand, marginal revenue, total cost, & marginal cost: Demand: P...

The following equations describe a firm’s demand, marginal revenue, total cost, & marginal cost: Demand: P = 1,000 – 10Q Total Cost: TC = 500 + 10Q + Q^2 Marginal Revenue: MR = 1,000 – 20Q Marginal Cost: MC = 10 + 2Q a. What level of output should be produced to maximize profits? b. What is the market price? c. How much profit will be earned? d. The firm sells cereal and competes with other firms selling slightly differentiated...

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