Question
A milling/ refining firm produces one unit of waste for each unit of milled/ refined product. The firm disposes of the waste by releasing it
A milling/ refining firm produces one unit of waste for each unit of milled/ refined product. The firm disposes of the waste by releasing it into the atmosphere. The inverse demand curve for the refined product (also the MB curve) is P=24-Q, where Q is the quantity of refined product consumed and P is the price that consumers. The inverse supply curve (also the MPC) for refining is MPC=2+Q. The marginal external cost, when the firm releases Q units of waste, is MEC=0.5Q
Suppose the government imposes an emission tax/fee of $T per unit of emission. Calculate the emission tax/fee that can result in the socially optimum level of refined product?
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