Assume there is a single firm producing the output with a general cost function C(x,e,). (a) Set
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Assume there is a single firm producing the output with a general cost function C(x,e,κ).
(a) Set up some reasonable assumptions on C(x,e,κ).
(b) Determine the socially optimal allocation, given a convex (linear) damage function.
(c) What instrument(s) does the regulator need to induce the firstbest allocation?
(d) Derive a rule for the second-best optimal tax when the regulator only has an emission tax as her instrument.
(e) Now assume C(x,e,κ)=(ax−be−κ)2/2b+cx2/2, and repeat (a)
through
(d) for the specific functional form.
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Related Book For
A Course In Environmental Economics
ISBN: 9781316866818
1st Edition
Authors: Daniel J Phaneuf, Till Requate
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