Question

It is well documented that Carbon Monoxide emissions from combustible engines increase in colder climates. This implies that damages are expected to be less severe in summer months than in winter. Nonetheless, air quality control authorities use a standard for CO that is uniform throughout the year with no allowance for seasonal effects. Use this information and the following model to answer the questions: MSB of CO abatement in Winter= 300-A MSB of Co abatement in Summer= 150-.5A MSC of CO abatement= .5A Assume the government sets a uniform standard for winter and summer at A=200. Support or refute this policy based on the criterion of allocative efficiency, using your model to explain your response.

Answer 1

MSB of CO abatement in Winter= 300-A

MSB of Co abatement in Summer= 150-.5A

MSC of CO abatement= .5A

There should be two distinct efficient levels of abatement, one for winter and one for summer.

Under a uniform abatement standard of 200, the MSB in winter equals $100 and the MSB in summer equals $50. MSC equals $100 in both periods. Since the standard does not correspond to the abatement level where MSB = MSC for both seasons, it is not efficient.