I'm struggling to calculate these practice questions could you help? Suppose the government is considering reducing carbon
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I'm struggling to calculate these practice questions could you help?
Suppose the government is considering reducing carbon monoxide emissions in an industrial area that is in close proximity to a residential area. Two firms are responsible for the emissions. The firms have the following total control (TC) and marginal control costs (MC) of reducing emissions:
Firm (1):MC1=2Q1
TC1= (Q1)2
Firm (2):MC2=3Q2
TC2= 1.5(Q2)2
WhereMC1andMC2are the marginal control costs andQ1andQ2are the quantity of emissions reduced of firm (1) and firm (2) respectively. With no controls, each firms has emissions of 30 units each.
- Suppose the government sets a uniform abatement standard of 20 units for each firm.Calculate the total cost to each firm.
- Calculate the cost-effective allocation of reducing emissions if a total reduction of 40 units is required. What is the total cost for each firm and how does this compare to part 1?
- What is the aggregate (both firms) cost of reducing emissions in parts 1 and 2?
- What policy options are available to the government that achieve cost effective reductions in emissions? Explain
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