Question

Assume the MCA for a pollutant is almost vertical (e.g. MAC = 1000X) and the MBA...

Assume the MCA for a pollutant is almost vertical (e.g. MAC = 1000X) and the MBA has a standard slope (e.g. MB = 100 – X). Also, assume the government underestimates the actual costs of abatement (they think it is cheaper to abate than it is). Which policy will be more economically efficient, a tax or a cap (or are they equal in efficiency)? Show your answer with a graph and write which will be the most efficient policy.

Sidenote: MAC is marginal abatement cost

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose the marginal cost of abatement for a airborne pollutant is MC= 4X, where X is...
Suppose the marginal cost of abatement for a airborne pollutant is MC= 4X, where X is measured in tons, and the marginal benefit of abatement is 500 - X. The maximum abatement (reducing pollution to zero) is XMAX= 500. a) Graph the MC and MB curves and show the efficienct level of abatement X* on the graph. b) Calculate the efficient level of abatement X* c) Suppose there is no abatement (X=0, which implies no actions are made to remove...
(c) The aggregate marginal cost function for this two-firm industry is: MC = 3Q Suppose the...
(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 = 35 − 0.5Q What is the efficient level of abatement? (d) What is the relationship between cost-effectiveness and efficiency? (e) What pollution tax would yield the efficient level of abatement you found in part (c)? If the pollution charge is levied on all units of emissions, how much revenue would the government receive? (f)...
Problem 1 What is the difference between cost effectiveness and efficiency? Problem 2 Assume that the...
Problem 1 What is the difference between cost effectiveness and efficiency? Problem 2 Assume that the market demand curve for diamonds is given by the following equation: PD = 1000 ? 2 QE, and the market supply curve, which is equal to the aggregated marginal cost curve of all producers, is given by, PS = 200 + 2 QU Diamond production, however, is associated with harmful side effects on both workers and nearby households and firms. The total damage to...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT