Question

There are three firms in the car production industry, where the production of cars gen- erates...

There are three firms in the car production industry, where the production of cars gen- erates pollution. All three firms have the same damage function: each additional unit of emissions damages society $15. However, all three firms have different abatement technologies. The marginal abatement cost is 5 + 0.2A for Volvo and 5 + 0.25A for Ford. Finally, the marginal abatement cost for Toyota is A − 5, where A is abatement. All three firms only care about maximizing profits and, in absence of environmental regulation, each firm will emit 50 units of pollution.

PLEASE HELP ANSWER E, F, and G ONLY THX U

a. Draw the marginal damage and the marginal abatement cost curves for Volvo. Explain in words your graph

b. If the government decides to reduce pollution to the efficient level, what would be the optimal pollution tax? Why? Explain your answer.

c. How much do Volvo, Ford and Toyota pay? How much revenue could the government collect with this tax? Why? (Hint: if you do not know the answer to b), assign a random number to the tax and calculate revenues.) Explain your answer.

d. If the government decides to introduce a Cap and Trade system, what would be the optimal number of pollution permits? Explain your answer.

e. What would be the price of permits? How many permits would each firm buy?

Explain your answer.

f. How much money could the government collect with this system? (Hint: if you do not know the answer to e), assign a number to the price and calculate the total amount.) Explain your answer.

g. Would the government prefer to tax firms or to set the cap and trade system? Why? Explain your answer.

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
There are three firms in the car production industry, where the production of cars gen- erates...
There are three firms in the car production industry, where the production of cars gen- erates pollution. All three firms have the same damage function: each additional unit of emissions damages society $15. However, all three firms have different abatement technologies. The marginal abatement cost is 5 + 0.2A for Volvo and 5 + 0.25A for Ford. Finally, the marginal abatement cost for Toyota is A − 5, where A is abatement. All three firms only care about maximizing profits...
There are three firms in the car production industry, where the production of cars gen- erates...
There are three firms in the car production industry, where the production of cars gen- erates pollution. All three firms have the same damage function: each additional unit of emissions damages society $15. However, all three firms have different abatement technologies. The marginal abatement cost is 5 + 0.2A for Volvo and 5 + 0.25A for Ford. Finally, the marginal abatement cost for Toyota is A − 5, where A is abatement. All three firms only care about maximizing profits...
In a different part of the world there a two different firms: Firm A and Firm...
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...
Two polluting firms emit 200 tons of SO2 each, with Marginal Abatement Costs given by MAC1=...
Two polluting firms emit 200 tons of SO2 each, with Marginal Abatement Costs given by MAC1= 2X1 and MAC2= 3X2, respectively. Xi represents the level of abatement for each firm i, in tons. The government wants to reduce total SO2 emissions by 30% and decides to impose a uniform cap on emissions, with each firm receiving 140 allowances for free (firms don’t pay for allowance). What is the market price of SO2 abatement? How many permits are traded between firms,...
(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)...
4. Consider an industry with three firms. Firm 1’s marginal cost of abatement (MCA)=20-2E1, where E...
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...
Assume there are two polluting firms in two different cities. In the business-as-usual outcome, Firm #1...
Assume there are two polluting firms in two different cities. In the business-as-usual outcome, Firm #1 would emit 20 units of pollution (e1=20) and Firm #2 would emit 20 units of pollution (e2=20). Additionally, assume the marginal abatement costs for Firm #1 and Firm #2 are given below: MAC1 (x1) = 0.5x1    &    MAC2 (x2) = 2x2 This pollutant is known to cause adverse health effects when in high concentrations. Since the firms are in different cities, assume the marginal social benefit...
Suppose there are two firms: Firm A and Firm B. These firms are each emitting 50...
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...
A pollution offset provides a.a charge for total emissions b.a positive incentive to encourage firms to...
A pollution offset provides a.a charge for total emissions b.a positive incentive to encourage firms to reduce emissions beyond the required amount c.an incentive payment to increase emissions d.the same incentive to reduce emissions as a pollution tax Buying and selling of pollution permits can be set up as a a.deposit-refund system b.two-part tariff c.cap-and-trade d.all of the above Emissions rate trading a.is effectively the same as cap-and-trade b.sets an overall limit on allowable emissions c.regulates emissions in relation to...
Suppose that two firms emit a certain pollutant in Shreveport, Louisiana. The marginal cost (MC) of...
Suppose that two firms emit a certain pollutant in Shreveport, Louisiana. The marginal cost (MC) of reducing pollution for each firm is as follows: MC1= 3e1and MC2= 45e2, where e1and e2are the amounts (in tons) of emissions reduced by the first and second firms, respectively. Assume that in the absence of government intervention, Firm 1 generates 500 units of emissions and Firm 2 generates 500 units of emissions. Suppose Shreveport regulators decide to reduce total pollution by 400 units. If...