Suppose there are two polluters with different MAC curves. Show how the regulator would aggregate these...

Suppose there are two polluters with different MAC curves. Show how the regulator would aggregate these MAC curves and then use them to determine the socially efficient equilibrium level of emissions, E*. Once E* is determined, how would the regulator ensure that the sum of emissions from each polluter totals E*? (Hint: Aggregation should reflect the equimarginal principle.)

Assume that the government does not know the location of the polluters MAC curve. The government plans to impose an emissions tax. Would the polluter have an incentive to reveal its MAC curve to the government? Could an efficient equilibrium be reached? Explain why or why not.

Why do pollution taxes have a more uncertain impact on the level of pollution than does a standard

Expert Solution

i gave the answer in detailed view so, it may look like huge one.

Rahul Sunny answered 1 year ago

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