Question

1. Suppose two firms owned by xxx Corporation and zzz Industries are currently emitting 8,000 tons of pollution each. Abatement costs for xxx  are MC_T = 0.03Q_T and abatement costs for zzz are MC_K = 0.02Q_K.

a.) Consider a pollution standard requiring each firm to reduce pollution by 5,000 tons. Calculate pollution reduction costs for each rm. (5 pts)

b.) What per unit tax would accomplish the same pollution reduction as the pollution standard in part (a)? Calculate pollution reduction costs for each

firm. (5 pts)

c.) Calculate the tax paid by each firm. (4 pts)

Answer 1

MACT MAC cA 0,02 ак TACH 5000 Q「 5000 nai aloate mamk cos of each m The mann ZZZ : MACK: 0.02 ( 5000): IO each biw 2 MACT- MACHK OO 5 es- Tax paid by