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COMMAND AND CONTROL APPROACH (CAC) 1. Consider the environmental problem created by two paint companies that release chromium wastes into a nearby stream. The state
COMMAND AND CONTROL APPROACH (CAC) 1. Consider the environmental problem created by two paint companies that release chromium wastes into a nearby stream. The state authorities set a standard for the waterway that requires a combined abatement level (A) for chromium of 15 units. Suppose that the two firms, firm 1 and firm 2, face the following marginal abatement cost equations: FIRM 1 TAC C1=1.6(A1)2MAC1=3.2A1 and FIMR 2TAC2=0.4(A2)2MAC2=0.8A2, where costs are measured in thousands of dollars. a. Find the total abatement costs using the uniform standard. b. If the state uses a uniform standard, show that such a ruling would not be costeffective. Which firm should be abating more, and which firm should be abating less? c. Find and prove the cost-effective solution. d. Compare the total abatement costs at cost-effective abatement allocation than the costs when a uniform standard is used COMMAND AND CONTROL APPROACH (CAC) 1. Consider the environmental problem created by two paint companies that release chromium wastes into a nearby stream. The state authorities set a standard for the waterway that requires a combined abatement level (A) for chromium of 15 units. Suppose that the two firms, firm 1 and firm 2, face the following marginal abatement cost equations: FIRM 1 TAC C1=1.6(A1)2MAC1=3.2A1 and FIMR 2TAC2=0.4(A2)2MAC2=0.8A2, where costs are measured in thousands of dollars. a. Find the total abatement costs using the uniform standard. b. If the state uses a uniform standard, show that such a ruling would not be costeffective. Which firm should be abating more, and which firm should be abating less? c. Find and prove the cost-effective solution. d. Compare the total abatement costs at cost-effective abatement allocation than the costs when a uniform standard is used
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