Question
In: Economics
Two firms are ordered by the federal government to reduce their pollution levels. Firm A's marginal...
Two firms are ordered by the federal government to reduce their pollution levels. Firm A's marginal costs associated with pollution reduction is MC = 20 + 4Q. Firm B's marginal costs associated with pollution reduction is MC = 10 + 8Q. The marginal benefit of pollution reduction is MB = 400 –40. a. What is the socially optimal level of each firm's pollution reduction? b. Compare the social efficiency of three possible outcomes: (1) require all firms to reduce pollu- tion by the same amount; (2) charge a commontax per unit of pollution; or (3) require all firms to reduce pollution by the sanme amount, but allow pollution permits to be bought and sold.
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Solutions
Rahul Sunny answered 1 year agoRelated Solutions
Economics Two firms are ordered by the federal government to reduce their pollution levels Firm A’s...
Economics
Two firms are ordered by the federal government to
reduce
their pollution levels Firm A’s marginal costs associated with
pollution
reduction is MC=20+4Q and firm B’s MC=10+8Q The marginal benefit of
pollution
reduction is MB=400-4Q
Compare the social efficiency of three possible
outcomes:
require all firms to reduce pollution by the same amount; charge a
common tax
per unit of pollution; or require all firms to reduce pollution by
the same
amount, but allow pollution permits to be bought...
Suppose the government wants to reduce the total pollution emitted by three firms. Currently, each firm...
Suppose the government wants to reduce the total pollution
emitted by three firms. Currently, each firm is creating 4 tons of
pollution, for a total of 12 tons. The government is considering
the following two methods to reduce total pollution to 6 tons:
1.
The government sets regulation specifying that each of the
three firms must cut its pollution in half.
2.
The government allocates two tradable pollution permits to each
of the three firms. Each permit allows the firm...
1. Two firms can reduce pollution at the following marginal abatement costs: MC1 = 12Q1 MC2...
1. Two firms can reduce pollution at the following marginal
abatement costs: MC1 = 12Q1 MC2 = 4Q2 where Qi is the abatement
(pollution control) of firm i = 1, 2. In the absence of regulation,
each firm would emit 40 units of emissions. Assume that each firm’s
objective is to minimize its compliance costs
(c) The aggregate marginal cost function for this two-firm
industry is: MC = 3Q Suppose the marginal benefit of pollution
control is given by: MB...
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...
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...
Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units.
Correcting for negative externalities - Regulation
versus tradablepermitsSuppose the government wants to reduce the total pollution
emitted by three local firms. Currently, each firm is creating 4
units of pollution in the area, for a total of 12 pollution units.
If the government wants to reduce total pollution in the area to 6
units, it can choose between the following two methods: Available Methods to Reduce Pollution 1. The government sets pollution standards using regulation. 2. The government allocates tradable pollution permits. Each firm...
Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units.
5. Correcting for negative externalities - Regulation
versus tradable permitsSuppose the government wants to reduce the total pollution
emitted by three local firms. Currently, each firm is creating 4
units of pollution in the area, for a total of 12 pollution units.
If the government wants to reduce total pollution in the area to 6
units, it can choose between the following two methods:Available Methods to Reduce Pollution1.The government sets pollution standards using regulation.2.The government allocates tradable pollution permits.Each firm...
Suppose pollution comes from two firms: H and L. The aggregate marginal benefit from pollution to...
Suppose pollution comes from two firms: H and L. The aggregate
marginal benefit from pollution to firms is described by
MB=16-(2/3) y, where
y is total pollution.
The two firms’ marginal benefit from pollution is described by
the following functions:
MBH = 24-2y H
MBL = 12-y L
where y H and y L represent the level of pollution for firm H
and firm L; that is, y= y H +y L
.
The government study has concluded that...
Suppose pollution comes from two firms: H and L. The aggregate marginal benefit from pollution to...
Suppose pollution comes from two firms: H and L. The aggregate
marginal benefit from pollution to firms is described by
MB=16-(2/3) y, where
y is total pollution.
The two firms’ marginal benefit from pollution is described by
the following functions:
MBH = 24-2y
H
MBL = 12-y L
where y H and y L represent the level of
pollution for firm H and firm L; that is, y= y H +y
L .
The government study has concluded that...
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