Assume you own a lake that is used for fishing. A power plant in the area...
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Assume you own a lake that is used for fishing. A power plant in the area wants to locate near the lake and wants to use the lake to discharge the emissions from the plant. (Assume fish and electricity are the only two commodities. If you do not allow the power plant to locate near the lake you do not have electricity to work with). The marginal damage function and marginal abatement cost are as follows. MD = 2.5E MAC = 1000 - 10E (a) Compute the socially efficient equilibrium level of pollution and calculate the net gains to society. (4 marks) (b) Compute the socially efficient equilibrium level of pollution and calculate the net gains to society. (4 marks) (c) Now assume the power plant owns the lake and you want to use the lake for fishing. (If the power plant does not allow fishing, you and the workers will starve). Compute the socially efficient level of pollution and calculate the net gains to society. (7 marks) Assume you own a lake that is used for fishing. A power plant in the area wants to locate near the lake and wants to use the lake to discharge the emissions from the plant. (Assume fish and electricity are the only two commodities. If you do not allow the power plant to locate near the lake you do not have electricity to work with). The marginal damage function and marginal abatement cost are as follows. MD = 2.5E MAC = 1000 - 10E (a) Compute the socially efficient equilibrium level of pollution and calculate the net gains to society. (4 marks) (b) Compute the socially efficient equilibrium level of pollution and calculate the net gains to society. (4 marks) (c) Now assume the power plant owns the lake and you want to use the lake for fishing. (If the power plant does not allow fishing, you and the workers will starve). Compute the socially efficient level of pollution and calculate the net gains to society. (7 marks)
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1 At the socially efficient equilibrium the quantity of pollution is equal to the level at which mar... View the full answer
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