There are two power generating firms A and B in a country Elec-land. Carbon will be...

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There are two power generating firms A and B in a country "Elec-land". Carbon will be emitted in power generating process. Current level of carbon emissions is 150 for A and 100 for B. Marginal cost of carbon emission reduction for two firms are as follows. MCA = 39A + 30 MCB = 2qg + 20 where q is the amount carbon emission reduction. Marginal benefit of emissions reduction is estimated to be MB = 200-2q To reduce the carbon emission, a government is considering emission fee or cap-and-trade scheme. (a) What is the socially optimal level of emissions reduction? (b) If emissions fee is set at 120, what is the amount of emissions reduction? There are two power generating firms A and B in a country "Elec-land". Carbon will be emitted in power generating process. Current level of carbon emissions is 150 for A and 100 for B. Marginal cost of carbon emission reduction for two firms are as follows. MCA = 39A + 30 MCB = 2qg + 20 where q is the amount carbon emission reduction. Marginal benefit of emissions reduction is estimated to be MB = 200-2q To reduce the carbon emission, a government is considering emission fee or cap-and-trade scheme. (a) What is the socially optimal level of emissions reduction? (b) If emissions fee is set at 120, what is the amount of emissions reduction?

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