4. Production of a good in an industry leads to pollution/emissions as a by-product of the...
Efficiency through Emissions Taxes Consider two firms that emit a uniformly mixed air pollutant (e.g., carbon dioxide). The marginal abatement cost functions for Firm 1 and Firm 2 are (subscripts indicate firms): MAC1 = 100 - 2e1 MAC2 = 100 - 0.50e2 Aggregate emissions for the industry are denoted as E = e1 + e2. The marginal damage function is: MD = 0.40E [1] Write out the aggregate marginal abatement cost (AMAC) function for the industry. Hint: solve the MAC curves...
Consider two firms (i.e., firms 1 & 2) with heterogeneous marginal abatement cost functions: MAC1=12 - 2E1 MAC2 =10 - E2 Assume the marginal external damages from emissions are: M E D = 1/2 E A . where EA is the sum of the two firms’ emissions. What quantity of emissions do firms produce in the absence of government intervention? What are the total external damages? What are the total abatement costs? Derive the aggregate marginal abatement cost function (Hint:...
Consider a pulp mill that emits air and water pollution emissions (E) that impose negative external costs (damages) onto society. The aggregate marginal abatement cost (MAC) and marginal damage (MD) curves have been estimated follows: MAC = 800 − 20E MD = 20E a. On a diagram, plot the MAC and MD curves. Be sure to label the curves, calculate the vertical intercept and horizontal intercepts of the MAC line, and the intersection point of the two lines. Show all...
depicted in the below figure 2. Firm 1 has marginal abatement cost "Firm 1 MAC 1" and Firm 2 has marginal abatement cost "Firm 2 MAC 1" depicted in figure 1. The industry aggregate marginal abatement cost curve "Aggregate MAC 1 is given in figure 2. a. What is the optimal emissions tax? 0.5 points b. Given the optimal emissions tax what is the total cost of abatement and the total damages of pollution? 0.5 points] c. Suppose that Firm...
5. Suppose that there is an industry with two firms (1 and 2) with marginal abatement cost curves as follows MAC1 1,000 2E1 MAC2 500 E2 E1 and E2 represent the respective emissions of each firm in tonnes [3] (a) Solve for initial emissions for each fim and rewrite both of the MAC equations as functions of abatement [6] (b) Derive the Industry MAC curve for this industry . Briefly explain each of the steps you take to find the...
The use of energy is one of the major causes of pollution and greenhouse gases that lead to climate change. It is desirable to reduce the emissions from energy use. Suppose there are two firms whose marginal abatements costs are as follows: MAC1=q1 and MAC2=q2 where q1is the amount of emissions reduction by firm 1 and q2is the amount of emissions reduction by firm 2. In the context of this question, what is “marginal abatement cost”? Draw the two marginal abatement...
Consider two firms (i.e., firms 1 & 2) with heterogeneous marginal abatement cost functions: MAC1 =12−2E1MAC2 =10−E2. Assume the marginal external damages from emissions are: M E D = 12 E A . where EA is the sum of the two firms’ emissions. What quantity of emissions do firms produce in the absence of government intervention? What are the total external damages? What are the total abatement costs? Derive the aggregate marginal abatement cost function (Hint: This will be a...
Question 3 (11 points) liability Q Consider a firm, which is polluting the water near Good Grief, Idaho. The marginal damage cost of this pollution is given by; MDC - - 6 + 0.75 e where e is the level of emissions. The marginal abatement costs are; MAC - 200 - 2 e. (a) Determine the optimal level of emissions. (b) Draw a diagram showing the MAC, MDC and the optimal level of emissions. On this diagram show the total...
Question 1 (1 point) 0.5E, the total damage cost of 20 units of For a marginal damage function equal to: MD emissions is __.- not possible to tell with the information given $100 $200 $10 Question 2 (1 point) Consider the following graph. What is the socially-efficient level of emissions? The equation for the marginal damages function is: MD 200 E MDC 900 200 MAC 1200 Emissions Question 3 (1 point) Suppose MAC1 100- 10E, MAC2 50 10E and MD...
Suppose a firm’s marginal abatement function is given by MAC = 120 –2.5E, and it faces a $110 per unit emissions tax. Suppose damages caused by this firm’s pollution is given by the function MD = 5E. a) To achieve social efficiency, how many units of emissions should the firm abate? b) What size per unit tax will give the firm an incentive to abate to the socially efficient level of emissions? c) If the firm abates to the socially...