Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

a. Find the amount of steel and fish in the equilibrium. b. What is the optimum level of steel, fish, and pollution? C. What is

a. Find the amount of steel and fish in the equilibrium. 

b.  What is the optimum level of steel, fish, and pollution? 

C. What is the Pigovian tax (for each level of pollution) necessary to achieve Pareto Optimal allocation


There are two firms in a village: steel firm (S) and fishery (F). Firm S produces some amount of steel, s, and also produces a certain amount of pollution, x, which it dumps into a river. Firm F, a fishery, is located downstream and is adversely affected by S's pollution. Suppose that firm S's cost function is given by Cs(s,x) = 52 - 4x + x2, where s is the amount of steel produced and x is the amount of pollution produced. Firm F's cost function is given by Cf(f,x) = 2 + 2x, where f indicates the production of fish. Price of steel, Ps is 4 dollars and price of fish, pf is 2 dollars. 


Step by Step Solution

3.43 Rating (153 Votes )

There are 3 Steps involved in it

Step: 1

Cs s1 s Yoe 9x S Sleal polin f fish 3D Po 4 ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: John J. Wild, Ken W. Shaw

2010 Edition

9789813155497, 73379581, 9813155493, 978-0073379586

More Books

Students also viewed these Economics questions

Question

EXAMPLE S Solve the equation z=8i.

Answered: 1 week ago

Question

Is it possible to evaluate a cost centers profitability? Explain.

Answered: 1 week ago