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Two lirms in the same industry produce hamful emissions. Initially, their marginal abatement costs are given by the blue and orange curves below [pre-innovation). In
Two lirms in the same industry produce hamful emissions. Initially, their marginal abatement costs are given by the blue and orange curves below ["pre-innovation"). In this Figure, marginal abatement cost is ploted on the vertical axis and emissions are on the horizontal axis. If one of these firms invests in research and development, their innovation will lower marginal abatement costs for both firms to the gray and yellow curves below. Suppose that the government has decided to tax emissions at a rate of $3 per unit regardless of whether the Firms innovate. What is the total cost of abatement for the industry in the "pre-innovation" period? What is the total cost of abatement for the industry in the "post-innovation" period? If Firm 1 ifrvests in innovation and produces a new technology, how much would their tax bill change by? How much would Firm 2 be willing to irvest in the technolagy if it could not sell the technology to Firm 1 ? How much would Firm 1 be willing to irvest in the technology if it could sell the technology to Firm 2 ? Use - sign to indicate a decrease or reduction. Two lirms in the same industry produce hamful emissions. Initially, their marginal abatement costs are given by the blue and orange curves below ["pre-innovation"). In this Figure, marginal abatement cost is ploted on the vertical axis and emissions are on the horizontal axis. If one of these firms invests in research and development, their innovation will lower marginal abatement costs for both firms to the gray and yellow curves below. Suppose that the government has decided to tax emissions at a rate of $3 per unit regardless of whether the Firms innovate. What is the total cost of abatement for the industry in the "pre-innovation" period? What is the total cost of abatement for the industry in the "post-innovation" period? If Firm 1 ifrvests in innovation and produces a new technology, how much would their tax bill change by? How much would Firm 2 be willing to irvest in the technolagy if it could not sell the technology to Firm 1 ? How much would Firm 1 be willing to irvest in the technology if it could sell the technology to Firm 2 ? Use - sign to indicate a decrease or reduction
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