To comply with new federal policy, a region must abate (reduce) pollution emissions by 300 units....
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To comply with new federal policy, a region must abate (reduce) pollution emissions by 300 units. Before regulation, two firms emit 600 units of pollutants. The marginal abatement cost (MAC) of firm A is given by MACA = .5QA where QA is the quantity of pollution abated by the firm. The MAC for firm B is MACB = Qa a) Suppose the EPA requires each firm to abate by 150 units. What is the MAC for each firm under this command and control regulation? Is it the least-cost allocation of abatement? What is the total cost of this policy? b) What is the least cost (efficient) allocation of abatement between the two firms? What is the reduction in abatement cost relative to command and control regulation? c) Suppose the EPA auctions off 300 pollution permits at a competitive auction. Each permit allows a firm to pollute by one unit. What is the market price of these permits? To comply with new federal policy, a region must abate (reduce) pollution emissions by 300 units. Before regulation, two firms emit 600 units of pollutants. The marginal abatement cost (MAC) of firm A is given by MACA = .5QA where QA is the quantity of pollution abated by the firm. The MAC for firm B is MACB = Qa a) Suppose the EPA requires each firm to abate by 150 units. What is the MAC for each firm under this command and control regulation? Is it the least-cost allocation of abatement? What is the total cost of this policy? b) What is the least cost (efficient) allocation of abatement between the two firms? What is the reduction in abatement cost relative to command and control regulation? c) Suppose the EPA auctions off 300 pollution permits at a competitive auction. Each permit allows a firm to pollute by one unit. What is the market price of these permits?
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a If each firm is required to abate by 150 units Firm As MAC MACA 50150 7500 Firm B... View the full answer
Related Book For
Managerial Economics Foundations of Business Analysis and Strategy
ISBN: 978-0078021909
12th edition
Authors: Christopher Thomas, S. Charles Maurice
Posted Date:
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