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I'm struggling to calculate these practice questions could you help? Suppose the marginal costs of emissions abatement for two polluting firms are as follows: Producer
I'm struggling to calculate these practice questions could you help?
Suppose the marginal costs of emissions abatement for two polluting firms are as follows:
Producer 1:MC1= 10Q1
Producer 2:MC2= 50Q2
WhereMC1andMC2are the marginal control costs andQ1andQ2are the volumes of emissions reduced by Producers 1 and 2 respectively. With no controls at all, each firm emits 100 units totaling 200 units.
- Compute the cost-effective allocation of control responsibility if a total reduction of 50 emission units is required (i.e. Q1 + Q2 = 50).
- If the Government wants to charge an emission tax, what per unit tax should they impose?
- How much total revenue would the Government collect from the tax on emissions in section b?
- What other policy instrument can achieve a cost-effective reduction in emissions? Explain.
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