1. According to the EPA’s prospective analysis of the 1990 to 2010 period, total social benefits (TSB) associated with the CAAA of 1990 are estimated at $690 billion ($1990) and the comparable total social cost (TSC) estimates are $180 billion ($1990). 

a. Explain why these data do not communicate whether the regulations outlined by the CAAA of 1990 are efficient. 

b. Using three separate graphs of conventionally-shaped TSB and TSC functions show that these values indicate that the regulations outlined in the CAAA of 1990 are

(i) efficient;

(ii) too lenient;

and (iii) too stringent.

2. Suppose that the MSB and MSC of abating sulfur dioxide are as follows. Use these functions to answer parts (a) and (b) below. MSB = 32 – 0.2A MSC = 16 + 0.2A 

a. Because the NAAQS are set using a benefit-based decision rule, find the abatement level of sulfur dioxide that would adhere to this rule. 

b. If instead the NAAQS were legislated to achieve efficiency, find the efficient abatement level (AE) for sulfur dioxide.