A) The total abatement is maximised under the cap and trade equilibrium. B) In the cap and trade equilibrium, Firm B’s gains from trade is (P* – P A) x (E X – E*/2)/2. C) Under the 50:50 split, Firm A’s total cost of abatement is given by PA x E*/2. D) Under cap and trade, Firm B pays Firm A an amount P* x (E X – E*/2), where E X is the abatement of Firm A after trade.
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- FIGURE 9.10 Price MSC MSB MPB а, о, о, о, Quantity per period Refer to Figure 9.10 to answer this question. Which of the following statements is true if external costs are recognized but external benefits are not? OA) The price would be P₁. B) The price would be P₂. MPC OC) The price would be P3. O D) The price would be P4.Discuss the sustability during the pandemic on how they have influenced the management of the AgribusinessThe figure shows a national marketable permit system for carbon dioxide. If marginal abatement costs turn out to be high and the government does not supply annual permits, what will the price of a permit be? Permit Price ($/ton) D2 P2 = 600 D1 %3D PT = 300 S P, = 150 C D 50 QT 75 Q2 Quantity of Permits (% of uncontrolled emissions) 100 OA. P1 OB. P2 OC. PT OD. PO O E. None of the above. 2. A, B
- The table below shows current carbon emissions and the cost of reducing carbon emissions for three industrial firms. The government introduces a cap-and-trade policy to regulate carbon emissions. The total cap on emissions is 180 tonnes of carbon, and each firm receives an initial allocation of tradable permits for 60 tonnes of carbon emissions. Current carbon emissions Firm A B C (tonnes) 80 100 70 a. Firm A will buy 40 emission ✓ Firm C. Cost of reducing emissions by 1 ton ($) 150 200 50 Firm B will sell 20 emissior Firm C. Instructions: Round your answer to the nearest whole number. b. To break even, the selling firm must receive $ 150V1. what are the limitations of PESTEL framework analysis?The figure below shows Marginal Damage from emissions, the regulator’s BELIEF about the aggregate marginal abatement cost (MAC) and the TRUE aggregate marginal abatement cost that is unobservable by the regulator. Use the figure to answer Questions 20 – 23. [20] Suppose the regulator issued E1 permits to the industry. What is the competitive market permit price? [21] Suppose the regulator issued E1 permits to the industry. What area(s) represent the welfare loss due to the uncertainty in aggregate marginal abatement costs? [22] Suppose the regulator uses its BELIEF about the AMAC function to achieve efficient emissions control using a per-unit uniform emissions tax. a) What per-unit tax would the regulator set? b) What level of aggregate emissions would result given the regulator’s tax? [23] Suppose the regulator uses its BELIEF about the AMAC function to achieve efficient emissions control using a per-unit uniform emissions tax. a) What area(s) represent the welfare loss due to the…
- Describe, with a diagram, what a Marginal Abatement Cost Curve shows and how it can be used for assessing interventionsTo model the effects of a carbon tax on CO2 emissions, policymakers study the marginal cost of abatement B(x), defined as the cost of increas- ing CO2 reduction from x to x +1 tons (in units of ten thousand tons- Figure 4). Which quantity is represented by the area under the curve over [0, 3] in Figure 4? B(x) ($/ton) 100 75 50+ 25- 1 3 Tons reduced (ten thousands) FIGURE 4 Marginal cost of abatement B(x).Lecture: Externality - Pigou8. All-Leather is a tanning company located on Lake Michigan in Chicago. Its total cost functionis C(QA) = 125 + 8QA + 5QA2, where QA is leather production per week in thousands of pounds.a) If leather sells for $408 per thousand pounds, how much leather will All-Leather produce?How much profit does All-leather earn?Enjoy is a beverage company located on Lake Michigan near All-Leather in Chicago. Enjoy’sproduction of beverages is negatively affected by water pollution from All-Leather’s productionof leather. Enjoy’s total cost function to produce beverages isC(QE) = 10QE +3QE2 + 3QA2where QE is Enjoy’s weekly production of beverages, in thousandsof gallons and, as above, QA is All-Leather’s weekly production of leather.b) Is this an example of a pecuniary externality or a real externality? Explain.c) What is the extra cost to Enjoy from an additional thousand tons of leather production by AllLeather (i.e., the external marginal cost of an extra unit of QA…
- b) Discuss and explain the concept of positive return toscale showing it relationship with the quantity ofproduction.Consider the following graph depicting the industry aggregate marginal abatement costs. The government is considering introducing an emission trading scheme where 140 domestic emission permits would be made available and allocated using an ascending uniform price auction. While the domestic auction takes place, international permits are also available at the price of $40 per permit. Firms can purchase international permits. The price of international permits is known to the firms. Choose the correct answers to the questions from the lists of available answers. Marginal Abatement Cost - Industry Costs 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 0 20 40 60 80 100 120 140 160 180 200 220 240 What would be the price at the auction? What would be the government's revenue from the auction? What would be the total abatement cost (TAC) for the industry? What would be the total compliance costs (TCC) for the industry? ✔ [ Choose ] 60 860 10000 600 400 40 9000 2800 1800 9800 8600 65…EU Subsidy No subsidy Subsidy 100, 100 500, 50 No subsidy 50, 500 250, 250 That is, if both governments subsidize their firms, the payoff to each country (net of the subsidy) is 100 million dollars. If India subsidizes India Biotech and the EU does not subsidize Zaxtra Vaccines, India Biotech will dominate the market. Hence, the payoff to India is 500 million dollars (net of the subsidy) and the payoff to the EU is 50 million dollars. If the EU subsidizes Zaxtra Vaccines and India does not subsidize India Biotech, the EU gets 500 million dollars and India gets only 50 million dollars. If neither country offers a subsidy (free trade scenario), then both countries get 250 million dollars. a. Obtain the Nash equilibria of this game. What are the associated payoffs for each country? b. If both countries cooperate, can they achieve a better outcome? Explain. C. Can you think of one way in which the two countries can ensure that the cooperative outcome is reached? India