Consider a firm, which is polluting the water near Good Grief, Idaho. The marginal damage cost...

 

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Consider a firm, which is polluting the water near Good Grief, Idaho. The marginal damage cost of this pollution is given by; MDC-6 + 0.75 c where e is the level of emissions. The marginal abatement costs are; MAC 2002 e. (a) Determine the optimal level of emissions. (b) Draw a diagram showing the MAC, MDC and the optimal level of emissions. On this diagram show the total damage cost and the total abatement costs associated with the optimal level of emissions. (c) Suppose that the firm is liable for the damages caused by its emissions. Explain verbally and with the use of your diagram from part (b), how this liability policy will yield the optimal level of emissions. (d) Calculate the value of the liability payment the firm will ultimately make. Consider a firm, which is polluting the water near Good Grief, Idaho. The marginal damage cost of this pollution is given by; MDC-6 + 0.75 c where e is the level of emissions. The marginal abatement costs are; MAC 2002 e. (a) Determine the optimal level of emissions. (b) Draw a diagram showing the MAC, MDC and the optimal level of emissions. On this diagram show the total damage cost and the total abatement costs associated with the optimal level of emissions. (c) Suppose that the firm is liable for the damages caused by its emissions. Explain verbally and with the use of your diagram from part (b), how this liability policy will yield the optimal level of emissions. (d) Calculate the value of the liability payment the firm will ultimately make.