Question

4. (Total: 34 pts) The following table summarizes the marginal abatement cost functions for an industry with two sources of pollution. Source Marginal Abatement Cost A MACA = 1,200 - 3EA B MACB = 800 – 2EB a) (15pts) Suppose the regulator wished to reduce total industry emissions by 25% by implementing a uniform standard. What is the level of emissions and abatement at each source under the uniform standard? What is the total compliance cost for the industry of the uniform standard? Is this a cost-effective allocation of the industry abatement target?

Answer 1

Ansoer Given Collect trom the data et us assume that Re equahon are Now x have to consid these valu au ii the Summai2eg the Maginal abtmenl r tc industry too sources of polluions >They nesclawished to yeduced total irdusy emitsionm a5 oi implemening a unifvm tandavd Theleel of and ablement at each souYce emmiyons under he unim ctandavd Now 200 3 Ea ) Ea- 400 CPollkuhon A (200-3Ea =0 => Eb 400 Poliuhion B 800- 2EbO 17 aEb- 800 Polluhon A i 400 and its as y. Teduchon in Ea 1g0 as educhon we lnouo that Polluhon B haf 400 and ts in Eb too The total compliance cost hay industry in to unifovm Standard 200 - 3Clo0) >MACI 1200 3EI -900 MAC acioo)MAC = 600 MAC2800 2E 800

7itis the cost-cffechive alloca hon in to industry abatement to hey el pense on cuet-flous yoo i degree of cmana hon and ts duty tha the elimination and no damish dis charg lenen dischrz long has MAC ct and to 100 all the follulers fac ey hey Similar expene in decreoye decvease ditharg MAC duty will likew pont hay to Coit of the a pollulers and itlimihing the all ocut Over Colt of gethng in to objechve deree of contamination THE END