Let's suppose a particular water pollutant causes K50 of damage per ton. Two sources emit the pollutant and each is currently generating 100 tons (total emissions 200 tons). Source 1 is known to be able to reduce its emissions at a marginal cost given by MC1 = 1*Q1. Source 2's abatement costs are not certain. One possibility is that MC2 = 2*Q2 but it's also possible that MC2 5*Q2. It cannot be determined in advance which of the MC2 curves is correct. If it were certain that source 2 had the first marginal cost curve (MC2 = 2*Q2), calculate each of the following: ( - 1. the efficient total amount of abatement; 2. the amount of abatement that should be done by each source; 3. the emissions tax that would get to efficiency; 4. the quantity of permits that would achieve efficiency; and 5. the market-clearing price of a permit if a permit policy were used.

Let's suppose a particular water pollutant causes K50 of damage per ton. Two sources emit the pollutant and each is currently generating 100 tons (total emissions 200 tons). Source 1 is known to be able to reduce its emissions at a marginal cost given by MC1 = 1Q1. Source 2's abatement costs are not certain. One possibility is that MC2 = 2Q2 but it's also possible that MC2 5Q2. It cannot be determined in advance which of the MC2 curves is correct. If it were certain that source 2 had the first marginal cost curve (MC2 = 2Q2), calculate each of the following: ( - 1. the efficient total amount of abatement; 2. the amount of abatement that should be done by each source; 3. the emissions tax that would get to efficiency; 4. the quantity of permits that would achieve efficiency; and 5. the market-clearing price of a permit if a permit policy were used.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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