Question
Please help me with the below: Suppose that two firms emit a certain pollutant. The marginal cost of reducing pollution for each firm is as
Please help me with the below:
Suppose that two firms emit a certain pollutant. The marginal cost of reducing pollution for each firm is as follows
MC1 = e1 (firm 1)
MC2 = 4 e2 (firm 2)
where e1 and e2 are the amounts (in tons) of emissions reduced by the first and the second firm, respectively. Assume that in the absence of government intervention each firm generates 80 units of emissions (160 in total).Answer the following:
1. How much would the 2 firms reduce pollution if there was no government intervention? e1+e2=
2. Suppose regulators decide to reduce total pollution bye*=100. What would be society'stotalcost of reducing pollution by e* if the regulator imposed that both firms reduce emissions by the same amount, that is e1=e2=(e*/2). {Hint: Remember that the Total Cost can be computed as the sum of Marginal Costs} Total Cost=
3. What emissions fee (per unit of emission) should be imposed to achieve the cost effective outcome? Fee=
4. What would be society'stotalcost of reducing pollution by e* if we implement the emission fee? {Hint: Remember that the Total Cost can be computed as the sum of Marginal Costs} Total Cost=
5. How much would the two firms pay in emission fees (total amount=unit fee * amount polluted)? Total fee firm 1+ Total fee firm 2=
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started