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Please clarify the following questions. Consider a competitive market for electricity production in which some firms are polluters: _ _ i 3 Firm A (coal
Please clarify the following questions.
Consider a competitive market for electricity production in which some firms are polluters: _ _ i 3 Firm A (coal burning): C(ch) * 1058A and the environment cost to society is E ($14) * 360$A Firm B (wind power): C1533) : 40533 and the environment cost to society is E($B) : 0 i) Assume the market operates without any recognition of environmental costs. At what prices will each firm operate? Assume X03) : 24000 the market demand for the commodity is given by: :0 ii) Find the competitive market equilibrium price and quantity using the firm's supply responses in part i) and the market demand above. Are both firms operating? why? iii) Suppose a planner uses the representative consumer's utility function to find the socially optimal allocation of resources to the two firms. Choose (in/1' 933' y) to solve ma$U($' y) : (24000)l\"($) + y subject to 5\" : 93A + $3 ,5\" 2 08: $3 2 0 and C(scA) + C(CBB) + E( supply? 33A) + y : 50' 000 What will be the aggregate production level and how much will each firm iv) Use a pair of sketches of the market and planner allocations (using the market demand/marginal benefit curve and cost curves of the firms) to compare the net benefit to society from the outcomes in part ii) and iv). Has the planner achieved an increase in net benefitStep by Step Solution
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