Suppose there are two polluting industries located in a city. In the business-as-usual outcome, industry #1 emits 20 units of pollution and industry #2 emits 20 units of pollution. If industry #1 reduces units of pollution from their business-as-usual level, they incur the following total abatement costs: TAC1(x1) = (1/2) x1^2

If industry #2 reduces units of pollution from their business-as-usual level, their total abatement cost is: TAC2(x2) = (1/4)x2^2

If a uniform standard is utilized to achieve an aggregate reduction of 24 tons of emissions, how much will each firm abate?

What is the cost-effective allocation of pollution control responsibility for Industry 1?

What is the cost-effective allocation of pollution control responsibility for Industry 2?

If this quantity of abatement is achieved through a tax, what will the tax be?

Answer rating: 100% (QA)

a In case uniform standard each firm will abate 12 242 units ... View the full answer