Show that in a symmetric oligopoly where the firms technologies satisfy assumption 5.1 , the first-best outcome

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Show that in a symmetric oligopoly where the firms’ technologies satisfy assumption 5.1 , the first-best outcome can be achieved by a tax on emissions and a subsidy on output. Determine the optimal levels of the tax and the subsidy.

assumption 5.1

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A Course In Environmental Economics

ISBN: 9781316866818

1st Edition

Authors: Daniel J Phaneuf, Till Requate

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Question Posted: Feb 11, 2024 07:03 AM

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Show that in a symmetric oligopoly where the firms technologies satisfy assumption 5.1 , the first-best outcome

Question:

Assumption 5.1 The cost function C(x,e) is twice continuously differentiable with C()>0, and for any production level x there is an emission level er such that C(x,e) = 0. Furthermore C(x,e) <0 Ve

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In a symmetric oligopoly all firms face the same cost function and have the same ability to control emissions Without any government intervention each firm would produce at a level where their private ...View the full answer

A Course In Environmental Economics

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