The following figure represents the Marginal Abatement Cost curves of two paper towel factories: Unbleached Factory, Number 1 and Bleached Factory, Number 2 in thefigure.Their MAC functions are: MAC1 = 61.5E1 and MAC2 = 6 -0.75E2E1 and E2 are the emissions of the two firms in tonnes. Marginal Abatement Cost65321000.5, 5.6250.5 5.255.2511, 4.51.5, 4.8752,4.51.5, 3.7522,32.5, 4.1252.5, 2.2533, 3.753, 1.5units.3.5, 3.3754,33.5, 0.754units.MACS4,04.5, 2.625Emissions5The Government wishes to limit the aggregate emissions to 6 tonnes.Calculate the following under a uniform standard:(Type only one number in the blank, do not include units and include up to three decimal places)Total Abatement Cost Bleached Towel Factory + Total Abatement Cost Unbleached Towel Factory = $5, 2.25Under $3 emissions tax:Total Abatement Cost Bleached Towel Factory + Total Abatement Cost Unbleached Towel Factory = $5.5, 1.87566, 1.56.5, 1.12577,0.757.5, 0.37588,0Now suppose that the government had instead chosen to introduce a cap and trade scheme with a total cap of 6 units and gives each firm permits of 3 units. Assume that thefirms act competitively. Answer the following using the Cap and Trade scheme:Bleached Firm's emissions:units.Bleached Firm's purchase of permits:Unbleached Firm's emissions:TC Bleached firm + TC Unbleached firm = $9MAC 1MAC 2

MAC1 = 6-1.5E1 MAC2 = 6 -0.75E2 Limit of emission 6 tons

The following figure represents the Marginal Abatement Cost curves of two paper towel factories: Unbleached Factory, Number 1 and Bleached Factory, Number 2 in the figure. Their MAC functions are: MAC1 = 6-1.5E1 and MAC2 = 6-0.75E2 E1 and E2 are the emissions of the two firms in tonnes.

The following figure represents the Marginal Abatement Cost curves of two paper towel factories: Unbleached Factory, Number 1 and Bleached Factory, Number 2 in the figure. Their MAC functions are: MAC1 = 6-1.5E1 and MAC2 = 6-0.75E2 E1 and E2 are the emissions of the two firms in tonnes.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The following figure represents the Marginal Abatement Cost curves of two paper towel factories: Unbleached Factory, Number 1 and Bleached Factory, Number 2 in the
figure.
Their MAC functions are: MAC1 = 61.5E1 and MAC2 = 6 -0.75E2
E1 and E2 are the emissions of the two firms in tonnes.

Marginal Abatement Cost
6
5
3
2
1
0
0
0.5, 5.625
0.5 5.255.25
1
1, 4.5
1.5, 4.875
2,4.5
1.5, 3.75
2
2,3
2.5, 4.125
2.5, 2.25
3
3, 3.75
3, 1.5
units.
3.5, 3.375
4,3
3.5, 0.75
4
units.
MACS
4,0
4.5, 2.625
Emissions
5
The Government wishes to limit the aggregate emissions to 6 tonnes.
Calculate the following under a uniform standard:
(Type only one number in the blank, do not include units and include up to three decimal places)
Total Abatement Cost Bleached Towel Factory + Total Abatement Cost Unbleached Towel Factory = $
5, 2.25
Under $3 emissions tax:
Total Abatement Cost Bleached Towel Factory + Total Abatement Cost Unbleached Towel Factory = $
5.5, 1.875
6
6, 1.5
6.5, 1.125
7
7,0.75
7.5, 0.375
8
8,0
Now suppose that the government had instead chosen to introduce a cap and trade scheme with a total cap of 6 units and gives each firm permits of 3 units. Assume that the
firms act competitively. Answer the following using the Cap and Trade scheme:
Bleached Firm's emissions:
units.
Bleached Firm's purchase of permits:
Unbleached Firm's emissions:
TC Bleached firm + TC Unbleached firm = $
9
MAC 1
MAC 2

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