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3. The table below depicts the marginal cleanup costs for Springfield's two polluters, ACAE Corp. and Bluth Industries. Currently, each firm is polluting 100 units
3. The table below depicts the marginal cleanup costs for Springfield's two polluters, ACAE Corp. and Bluth Industries. Currently, each firm is polluting 100 units (for an industry total of 200 units). However, regulators have decided that the total amount of pollution in Springfield needs to be cut in half. a) b) c) Suppose regulators adopt a command-and-control pollution standard that forces each firm to reduce pollution by the same amount, going from 100 units down to 50 umits, What is the total cost of cleanup under this regulation? (15420+30445+65) + (10+12+16+22+30) = 265 suppose, instead, that regulators adopt pollution taxes. What tax level would guarantee the same outcome? A tax of 45.01 would achieve the same amount of cleanup. Under the tax, how much pollution would each firm clean up? ACME cleans up 40 units. Bluth cleans up 60 units. What is the total cost of cleanup under this regulation? 245 How much tax revenue would the tax generate? 45,01 x 100 = 4,501 If regulators were to implement cap-and-trade, how many total permits would they need to issue to guarantee the same outcome from part a)? 100 permits How many permits would each firm purchase if regulators were to auction them off? ACME buys 60 permits. Bluth buys 40 permits
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