1. Suppose that the Marginal Abatement Cost function and the Marginal Damage function for an industry are given as follows: MAC100-0.8e MD = 0.2e For simplicity here, we are assuming that they are linear. a. Graph the MAC and MD curves for this industry. Make sure you are marking out any and all relevant axis intercepts. b. Suppose that an emission tax is imposed to achieve the efficient outcome, at what value should the government set the tax? Explain. c. At the efficient tax established in part b, what is the expected level of emissions? Explain.

1. Suppose that the Marginal Abatement Cost function and the Marginal Damage function for an industry are given as follows: MAC100-0.8e MD = 0.2e For simplicity here, we are assuming that they are linear. a. Graph the MAC and MD curves for this industry. Make sure you are marking out any and all relevant axis intercepts. b. Suppose that an emission tax is imposed to achieve the efficient outcome, at what value should the government set the tax? Explain. c. At the efficient tax established in part b, what is the expected level of emissions? Explain.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter16: Government Regulation

Section: Chapter Questions

Problem 9E

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