Suppose MAC functions for two firms, Firm 1 and Firm 2, are MAC₁= 60-2E and MAC₂-48-3E2 respectively. (i) Suggest the (socially) cost-effective way to set emission standards for the two firms to reduce their combined level of emissions to 20 units. [Note that we want only 20 units of emissions from the two firms at the end.] (ii) What is the sum of the abatement costs (or total social compliance costs) when emissions are reduced from the two firms to 20 units in the socially cost-effective manner by using emission standards. [This is related to part (i).] (iii) What emission tax rate applied simulataneously to the two firms reduces the combined level of emissions to 20 units from the two firms just as the cost-effective way to set standards? [This question needs to answered based on your answer(s) to part (ii).]
Suppose MAC functions for two firms, Firm 1 and Firm 2, are MAC₁= 60-2E and MAC₂-48-3E2 respectively. (i) Suggest the (socially) cost-effective way to set emission standards for the two firms to reduce their combined level of emissions to 20 units. [Note that we want only 20 units of emissions from the two firms at the end.] (ii) What is the sum of the abatement costs (or total social compliance costs) when emissions are reduced from the two firms to 20 units in the socially cost-effective manner by using emission standards. [This is related to part (i).] (iii) What emission tax rate applied simulataneously to the two firms reduces the combined level of emissions to 20 units from the two firms just as the cost-effective way to set standards? [This question needs to answered based on your answer(s) to part (ii).]
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter14: Environmental Economics
Section: Chapter Questions
Problem 17SQ
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