There are 2 factory which is firm A and Firm B. Firm A's pollution abatement cost...
There are 2 factory which is firm A and Firm B.
Firm A's pollution abatement cost is 2x3 and Firm B's pollution abatement cost is 2x2. The per unit benefit to a unit of pollution abatement is a constant $600.
We decide that issue permit to produce pollution and allow them to trade it.
However, politician determines that if they are unable to trade, firm A will be forced to reduce pollution by 100 units, and firm B reduce pollution by 60 units.
Each permit allows the firm to emit ine unit of pollution.
i. What market clearing price if pollution permits would you expect to occur?
ii. What level of pollution abatement does each firm engage in? Is this socially optimal?
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There are 2 factory which is firm A and Firm B.
Firm A's pollution abatement cost...
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You are a policy advisor responsible for air pollution in a region where there are only two chemical plants run by firm A and firm B. Firm A’s pollution abatement costs are 2x3, where x is a unit of pollution. Firm B is newer and has pollution abatement costs of 2x2. Assume that neither firm is initially abating pollution. The per-unit benefit to a unit of pollution abatement is a constant $600. ii. Suppose your boss, an elected politician, decides...
A firm’s marginal abatement cost function is given by MAC = 200–5E. Costs are in dollars...
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1. A firm’s marginal abatement cost function is given by MAC = 200–5E. Suppose that, after...
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There are two firms producing cement. Each produces 20 units of pollution, and each has the...
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Possible Solutions Total Cost of eliminating 2 units of pollution The options for the first fill in the blank (Firm X) are: $295, $120, $215, $320. The options for the second fill in the blank (Firm...
Possible Solutions
Total Cost of eliminating 2 units of
pollution
The options for the first fill in the blank (Firm X) are: $295,
$120, $215, $320.
The options for the second fill in the blank (Firm Y) are:
$1250, $800, $1850, $1500
The options for the third fill in the blank (Firm Z) are: $180,
$250, $230, $100
The options for the forth fill in the blank are: $1490, $2420,
$1625, $1645
Firm X
Firm Y
Firm Z
Initial pollution...
Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units
5. Correcting for negative externalities - Regulation versus tradable permits Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two methods: Available Methods to Reduce Pollution 1. The government sets pollution standards using regulation. 2. The government allocates tradable pollution...
Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is...
Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two methods: Available Methods to Reduce Pollution 1. The government sets pollution standards using regulation 2. The government allocates tradable pollution permits. Each firm faces different costs,...
Assume that a firm has the following marginal benefit of pollution (denoted E for emissions, measured...
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Joulutet 3. Assume that a firm has the following marginal benefit of pollution (denoted E for...
Joulutet 3. Assume that a firm has the following marginal benefit of pollution (denoted E for emissions, measured in tons): MB=150-5 E e. Now assume that instead the government allocates each firm permits to pollute equal to the total current pollution minus 12 tons, but allows the firms to trade. Which firm will purchase permits and which firm will sell permits? Hint: Notice that total pollution reduction of firm 1 plus firm 2 will be 24 tons. f. How much...
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. 6. Now suppose that firms are allowed to sell and buy pollution permits from each other. In the absence of any permits, they need to reduce pollution by 6 units each. If the price of pollution permits is $2, how many pollution permits would Firm 1 buy? 7.Now suppose that firms...
Possible Solutions
Total Cost of eliminating 2 units of
pollution
The options for the first fill in the blank (Firm X) are: $295,
$120, $215, $320.
The options for the second fill in the blank (Firm Y) are:
$1250, $800, $1850, $1500
The options for the third fill in the blank (Firm Z) are: $180,
$250, $230, $100
The options for the forth fill in the blank are: $1490, $2420,
$1625, $1645
Firm X
Firm Y
Firm Z
Initial pollution...
Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two methods: Available Methods to Reduce Pollution 1. The government sets pollution standards using regulation 2. The government allocates tradable pollution permits. Each firm faces different costs,...
Joulutet 3. Assume that a firm has the following marginal benefit of pollution (denoted E for emissions, measured in tons): MB=150-5 E e. Now assume that instead the government allocates each firm permits to pollute equal to the total current pollution minus 12 tons, but allows the firms to trade. Which firm will purchase permits and which firm will sell permits? Hint: Notice that total pollution reduction of firm 1 plus firm 2 will be 24 tons. f. How much...
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