Question 5 The ACME Manufacturing Company is the only firm that uses water from the Firelly...

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Question 5 The ACME Manufacturing Company is the only firm that uses water from the Firelly River in Freedonia. ACME has marginal abatement costs given by MAC 250 2.2 c. ACME emits a pollutant that causes damages to the Firefly River and to the areas that the river runs through. The marginal damage cost function is represented by MDC -12 + 3 e. a. b. Find the optimal level of emissions. Il the local government uses an emissions tax, what tax rate should the government use? What does the ACME tax payment equal? D. E. Gumby of the Freedonian Taxpayers Federation has an offer for ACME. "I will give you $10,000 if you ignore the legislation (i.e. the tax) and continue to emit at the level you had prior to the tax. That will show the government for imposing their new tax." Should ACME accept this offer? Question 5 The ACME Manufacturing Company is the only firm that uses water from the Firelly River in Freedonia. ACME has marginal abatement costs given by MAC 250 2.2 c. ACME emits a pollutant that causes damages to the Firefly River and to the areas that the river runs through. The marginal damage cost function is represented by MDC -12 + 3 e. a. b. Find the optimal level of emissions. Il the local government uses an emissions tax, what tax rate should the government use? What does the ACME tax payment equal? D. E. Gumby of the Freedonian Taxpayers Federation has an offer for ACME. "I will give you $10,000 if you ignore the legislation (i.e. the tax) and continue to emit at the level you had prior to the tax. That will show the government for imposing their new tax." Should ACME accept this offer?

Answer rating: 100% (QA)

SOLUTION Question 5 a To find the optimal level of emissions we need to equate the marginal abatement cost MAC to the marginal damage cost MDC MAC MDC ... View the full answer