Question

Suppose there are two firms: Firm A and Firm B. These firms are each emitting 50 tons of pollution. Firm A faces marginal abatement cost MACA = 6A and Firm B faces marginal abatement cost MACB = 12A where A is tons of pollution abatement. The government wishes for the total amount of pollution to be 80 tons.

1. (1.5 points) What is the total cost of abatement if the government mandates that Firm A abate 20 tons (such that Firm B would not have to abate)?

2. (1.5 points) What is the total cost of abatement if the government mandates that Firm B abate 20 tons (such that Firm A would not have to abate)?

3. (1.5 points) What is the total cost of abatement if the government mandates each firm abate 10 tons?

Answer #1

Suppose there are two firms: Firm A and Firm B. These firms are
each emitting 50 tons of pollution. Firm A faces marginal abatement
cost MACA = 6A and Firm B faces marginal abatement cost MACB = 12A
where A is tons of pollution abatement. The government wishes for
the total amount of pollution to be 80 tons.
1. (2 points) At the cost effective allocation of abatement, how
much does Firm A abate?
2. (2 points) What tax per...

In a different part of the world there a two different firms:
Firm A and Firm B. These firms are each emitting 100 tons of
pollution. Firm A faces marginal abatement cost MACA = 5A and Firm
B faces marginal abatement cost MACB = 2A where A is tons of
pollution abatement. The government’s control authority wishes the
firms to reduce total emissions to 130 tons using the Cap and Trade
system and plans to initially give each firm half...

In this situation there are two independent firms, each emitting
15 units of pollutants into the environment for a total of 30 units
in their region. The government imposes an abatement standard of 15
units. The polluter’s cost functions are as follows: TAC1 = 5 +
0.75(A1)^2 and MAC1 = 2A1 and TAC2 = 5 + 0.5(A2)^2 and MAC2 = A2,
where A is units of abatement undertaken by a firm
a. Suppose that the government mandates each company to...

Question: Suppose there are two firms and they pollute
the environment. Their total abatement cost is given...
Suppose there are two firms and they pollute the environment.
Their total abatement cost is given below.
TC(R1)=1/2(R1)^2,
TC(R2)=2/3(R2)^3/2
Suppose the government wants to reduce pollution by 12
units.
1. Find the cost-efficient way to abate 12 units of pollution.
How many of these 12 units would Firm 1 abate?
2. Find the cost-efficient way to abate 12 units of pollution.
How many...

Suppose there are two firms and they pollute the environment.
Their total abatement cost is given below.
TC(R1)=1/2(R1)^2,
TC(R2)=2/3(R2)^3/2
Suppose the government wants to reduce pollution by 12
units.
1. Find the cost-efficient way to abate 12 units of pollution.
How many of these 12 units would Firm 1 abate?
2. Find the cost-efficient way to abate 12 units of pollution.
How many of these 12 units would Firm 2 abate?
3. Choose all the policies below that do not...

Consider two polluting firms. The marginal cost of abatement
for firm 1 is MC1 =
e1 + 300, and the marginal cost of
abatement for firm 2 is MC2 =
3e2, where e1 and
e2 are the tons of pollution abatement by firms 1
and 2, respectively. Baseline pollution levels are
bl1 = 2000 and
bl2 = 2000.
Suppose the government sets a pollution reduction goal of 1600
total units of abatement.
Write down two equations that ensure that the...

The town of Pollutionville has two smelting factories, Factory A
and B. Each factory produces air pollution. Factory A’s marginal
abatement costs are given by MACA=20-0.5eA. Factory B’s marginal
abatement costs are given by MACB=40-eB. The Pollutionville City
Council wants to introduce a constant per unit emissions tax that
will reduce total emissions from the two factories by 18.75%
cost-effectively. The total tax receipts the Council would collect
from such a tax would be $ _______________.

4. Consider an industry with three firms. Firm 1’s marginal cost
of abatement (MCA)=20-2E1, where E is the tons of pollution
emitted. Firm 2’s MCA=10-E2. Firm 3’s MCA=40-2E3. Please draw a
diagram to support your answers to the following questions. If
there is no policy to reduce pollution, how much pollution will be
emitted by each firm? What will be total pollution? If the
government imposes a tax of $10/ton, how much pollution will be
emitted by each firm? What...

tradable permits
Two steel factories are currently emitting 8,000 tons of
pollution each (for a total of 16,000 tons). Pollution reduction
(abatement) costs for Plant 1 are given by MCR1= 0.02Q and for
Plant 2 by MCR2 = 0.03Q, where Q represents tons of abatement, and
MCR the marginal cost of pollution reduction.
A. Suppose a tradable permit system is instituted in which
permits for emissions of 6,000 tons of pollution are freely issued,
3,000 permits to each plant. What...

Two firms, Firm A and Firm B, have the following marginal
abatement cost functions: MACA = 180-3EA and
MACB = 100 - 2EB. A new emission control
program requires them to reduce the total or combined emissions to
80 units. To achieve this, the regulator provides Firm A with 45
transferable discharge permits and Firm B with 35 initially.
Suppose that one permit allows one unit of emissions, and that the
market for permits is competitive. In equilibrium,
(a)how many...

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