Question

Suppose you have 2 polluting sources in a region. With the objective to mitigate pollution, the government sets emissions limits as 10 units per company (Ast). As a market oriented policy, the government imposes an emission charge of $10 per unit (MT 10) of tax after MT MAC condition is met. The following functions are calculated for both polluters Polluter 1: MAC1 4.0(A1) Polluter 2: MAC2 2.4(A2) Total tax per pollutert(Ast - Ao) Where Ao Actual units abated The graphs below are meant to help you solve the problem S45 30 0 Polluter 1 Polluter 2 525.0 535 MAC2 242 Marginal Tax MAC1-4.0A 20.0 $150 S100 Mergnel Tax S25 515 510 S5.0 10 10 Abetement Level Abetement Level 1. Determine how many units are to be abated per polluter, given this market incentive. (Hint 2. Determine total tax per polluter. (Hint: Total tax is defined by the area below MT between MT- 3. Calculate the Total Tax plus Total Cost for each polluter. (Hint: TAC+Total Tax. TAC is defined 4. What are the savings per polluter if we compare the market incentive solution to no incentive at Take into account that MAC =MT.) MAC and the Standard imposed (MT-10.) as the area below MAC up to MAC-MT.) all (No tax)? (Hint: Saving will be the area below MAC up to MT from MAC=MT to the Standard (MT-10).)

Answer 1

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