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Assume that there are two electric power plants (rm 1 and rm 2) emitting sulfur dioxide, an air pollutant. They can reduce emissions at the
Assume that there are two electric power plants (rm 1 and rm 2) emitting sulfur dioxide, an air pollutant. They can reduce emissions at the following total costs, where q r is tons of emissions abatement by rm 1, and q; is tons of abatement by rm 2: 1 m = la? 1 TAG: = E '1; Assume that unregulated emissions are 20 tons for each rm, for a total of 40 tons, where x denotes emissions- That is in the absence of regulation, :51 + x2 = 40. a. An environmental regulator must reduce total emissions of sulir dioxide by 18 tons. Compute the cost-effective allocation of control responsibility; how many tons of emissions abatement must each rm achieve in order to minimize the total abatement costs? b. If the regulator chooses to meet her 18-ton reduction objective with an emissions tax, what perunit charge should be imposed? c. How much government revenue will the tax system generate, if the tax is levied on all units of pollution? d. Please nd the market (aggregate) marginal abatement cost function. Let the total social benet function for sulrr dioxide pollution abatement be: TSB(Q) = 45 - Q 02
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