Question
In: Economics
What is the efficient level of abatement for each firm?
Two companies generate electricity in Wisconsin. One company, called “Coal,” gen- erates electricity exclusively using coal-fired plants while the other company, “Natural Gas,” generates electricity from natural gas. Coal’s marginal cost of pollution abate- ment is 10 + 0.5 ∗ A while Natural Gas’ is −5 + A. Marginal damage from pollution is equal to the marginal benefit from abatement, which equals to $20. In absence of environmental regulations from the EPA, the level of pollution for each firm is 30.
a. What is the efficient level of abatement for each firm?
What would be the deadweight loss from no abatement by either firm?
What would be the deadweight loss from each firm abating by half the total efficient abatement level in part (a)?
What would be the optimal pollution tax? How much revenue would it generate?
What would be the optimal number of pollution permits for a Cap & Trade system and the price of permits?
Compare the environmental policies
the calculation needed for both Caol and natural gas
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
Firm A Firm B Emissions Total abatement costs Marginal abatement costs Emissions Total abatement costs Marginal...
Firm A
Firm B
Emissions
Total abatement costs
Marginal abatement costs
Emissions
Total abatement costs
Marginal abatement costs
4
0
0
4
0
0
3
1
1
3
2
2
2
3
2
2
6
4
1
6
3
1
12
6
0
10
4
0
20
8
1. What are the total abatement costs for the firms and economy
to reduce 50% of the emissions with command and control
policies?
2. How will cap and trade improve the situation,...
Number of units abated (reduced) MC of abatement Firm 1 MC of abatement Firm 2 MC...
Number of units abated (reduced)
MC of abatement Firm 1
MC of abatement Firm 2
MC of abatement Firm 3
1
1
2
3
2
2
4
5
3
3
12
7
4
5
14
9
5
6
16
10
6
14
22
18
Now suppose that instead of a standard, the regulator has chosen
to implement a pollution trading program. Specifically, 2 pollution
permits are allocated to each firm and then the firms are allowed
to trade, how many...
Number of units abated (reduced) MC of abatement Firm 1 MC of abatement Firm 2 MC...
Number of units abated (reduced)
MC of abatement Firm 1
MC of abatement Firm 2
MC of abatement Firm 3
1
1
2
3
2
2
4
5
3
3
12
7
4
5
14
9
5
6
16
10
6
14
22
18
If the regulator knows nothing about the costs of control or the
damage costs, what are the policy options? If the regulator expects
polluters to deal with pollution “out of the goodness of their
hearts,” is...
Pollution Abatement Costs and Expenditures Examine the state-level data for total capital and operating abatement costs....
Pollution Abatement Costs and Expenditures
Examine the state-level data for total capital and operating
abatement costs. Analyze the differences among any subset of
states, and offer a hypothesis as to why these differences might
exist.
There are two firms, firm A and firm B. Their marginal abatement costs are MCA =...
There are two firms, firm A and firm B. Their marginal abatement
costs are MCA = 4AA and MCB = AB, where AA and AB are the tons of
emissions abated by firm A and B, respectively.
a. Calculate the total cost if each firm is required to abate 50
tons of emissions.
b. Would this policy be cost effective and why?
c. What if the government set the total abatement to be 100 tons
with tradable allowances, what is...
a. What is the risk level of a portfolio on the efficient frontier with a return...
a. What is the risk level of a portfolio on the efficient
frontier with a return of 6% when the market portfolio has an
expected return of 10% and the risk free rate is 2%? The standard
deviation of the returns on market is 14%.
b. What is the expected rate of return and alpha of a stock with
a ? of 0.9, when the realised gain on the stock is 13% next
year?
According to our textbook, a firm with market power produces "less than the socially efficient level...
According to our textbook, a firm with market power produces
"less than the socially efficient level of output because it
charges a price that exceeds its marginal cost of production". As a
manager isn't market power your goal? How do you balance your need
for profit with society's need to produce goods and services as
cheaply as possible?
According to our textbook, a firm with market power produces "less than the socially efficient level...
According to our textbook, a firm with market power produces
"less than the socially efficient level of output because it
charges a price that exceeds its marginal cost of production". As a
manager isn't market power your goal? How do you balance your need
for profit with society's need to produce goods and services as
cheaply as possible?
Two firms (firm 1 and firm 2) can control pollution with the following marginal abatement costs:...
Two firms (firm 1 and firm 2) can control pollution with the
following marginal abatement costs:
MAC1=100q1
MAC2=200q2
where q1 and q2 are the amount of pollution
reduced by the first and second firms. Assume that with no controls
at all, each firm would be emitting 100 units of pollution or 200
units for both firms.
Suppose that the government sets up an emissions trading market
mechanism to achieve a pollution goal of 100 units of total
pollution. The government...
Two firms (firm 1 and firm 2) can control pollution with the following marginal abatement costs:...
Two firms (firm 1 and firm 2) can control pollution with the
following marginal abatement costs:
MAC1=100q1
MAC2=200q2
where q1 and q2 are the amount of pollution
reduced by the first and second firms. Assume that with no controls
at all, each firm would be emitting 100 units of pollution, or 200
units for both firms.
Suppose that the government sets up an emissions trading market
mechanism to achieve a pollution goal of 100 units of total
pollution. The government...
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