Ipha Company and Beta Company are each emitting 10 pounds of waste matter into the atmosphere each hour. for a total of 20 pounds. The regional air quality control board wishes to cut the emissions in half. It is debating whether to issue a regulation requiring the two companies to halve their emissions to five pounds an hour each. or to tax the emissions. Because they manufacture different products, with different technologies, Alpha and Beta estimate the total costs of reducing their emissions quite differently: A) What tax rate on emissions would succeed in reducing all emissions by half? B) Which firm(s) would reduce their emissions under that tax? C) What is the cost of this tax on firm Alpha? D) What is the cost of this tax on firm Beta? E) If the board decided to limit both firms to produce only 5 pounds per hour of waste, what would be the cost of this regulation on firm Alpha? F) If the board decided to limit both firms to produce only 5 pounds per hour of waste, what would be the cost of this regulation on firm Beta? G) Assuming that taxes do not impose a social cost (they are just a transfer, one side loses and another gains, for a net benefit or loss of zero), which of the two policies impose the lowest cost to society to achieve the same result: the tax found in (A) or the limit to emissions from (EF) ? Ipha Company and Beta Company are each emitting 10 pounds of waste matter into the atmosphere each hour, for a total of 20 pounds. The regional air quality control board wishes to cut the emissions in half. It is debating whether to issue a regulation requiring the two companies to halve their emissions to five pounds an hour each. or to tax the emissions. Because they manufacture different products, with different technologies, Alpha and Beta estimate the total costs of reducing their emissions quite differently: A) What tax rate on emissions would succeed in reducing all emissions by half? B) Which firm(s) would reduce their emissions under that tax? C) What is the cost of this tax on firm Alpha? D) What is the cost of this tax on firm Beta? E) If the board decided to limit both firms to produce only 5 pounds per hour of waste, what would be the cost of this regulation on firm Alpha? F) If the board decided to limit both firms to produce only 5 pounds per hour of waste, what would be the cost of this regulation on firm Beta? G) Assuming that taxes do not impose a social cost (they are just a transfer, one side loses and another gains, for a net benefit or loss of zero), which of the two policies impose the lowest cost to society to achieve the same result: the tax found in (A) or the limit to emissions from (EF)
