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Below are the marginal costs of abating pollution for three firms in an industry, based on their emissions levels. Each firm is now emitting 10 tons/week, so total emissions are 30 tons/week. Suppose we wish to reduce total emissions by 50 percent, to 15 tons per week in this industry.

	Marginal Abatement Costs ($/ton)
Emissions (tons/week)	Firm 1	Firm 2	Firm 3
10	0	0	0
9	5	1	1
8	9	3	2
7	12	5	3
6	14	7	5
5	20	9	6
4	27	11	7
3	35	13	8
2	44	15	9
1	54	17	11
0	65	19	13

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Question 13 pts

How much pollution will each firm be able to release if we use the equiproportionate method of reductions (i.e. reduction split evenly)?

Firm 1:                             [ Select ]                       ["5", "10", "8", "7", "3"]      

Firm 2:                             [ Select ]                       ["5", "7", "9", "2", "4"]      

Firm 3:                             [ Select ]                       ["7", "9", "5", "8", "6", "4"]      

Question

What is the total cost of emission reductions for each firm if we use the equiproportionate reduction method (i.e. reduction split evenly)?

Firm 1:                             [ Select ]                       ["14", "176", "122", "26", "60"]      

Firm 2:                             [ Select ]                       ["49", "9", "25", "1", "16"]      

Firm 3:                             [ Select ]                       ["24", "17", "11", "41", "3"]      

How much pollution will each firm be able to release if we use the equimarginal reduction method (i.e. marginal cost across firms is equalized)?

Firm 1:                             [ Select ]                       ["3", "5", "6", "10", "8"]      

Firm 2:                             [ Select ]                       ["9", "4", "7", "2", "5"]      

Firm 3:                             [ Select ]                       ["2", "7", "4", "9", "5"]      

What is the total cost of emission reductions for each firm if we use the equimarginal reduction method (i.e. marginal cost across firms is equalized)?

Firm 1:                             [ Select ]                       ["26", "14", "87", "5", "60"]      

Firm 2:                             [ Select ]                       ["9", "1", "16", "25", "49"]      

Firm 3:                             [ Select ]                       ["24", "41", "11", "3", "17"]      

Answer 1

ANSWER 1: Following equiproportionate method of reducing emissions to 15 Tons per week we will simply divide required reduction by number of firms i.e. 15/3 = 5 tons/week for each firm.

ANSWER 2: Cost for each firm will be -

FIRM 1 = $20

FIRM 2 = $9

  FIRM 3 =$6

ANSWER 3: Using equimarginal method the number of emissions that each firm would be able to emit is:

FIRM 1 = 8 TONS

FIRM 2 = 5 TONS

FIRM 3= 2 TONS

ANSWER 4: $9

According to equimarginal reduction method ( i.e. marginal cost is equal across all firms) , each firm must spend $9 for abatement of emissions.

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