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A: External cost refers spill-over cost of a good on society who is neither a consumer nor a producer.
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Q: Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E):…
A: Consider two firms with the following marginal abatement costs(MAC) as a function of emissions (E).
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A: A negative externality is a concept in economics that refers to the unintended side effects or costs…
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A: Positive externalities occurs when prices are lower and quantities are higher.
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Q: Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E):…
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Q: Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E):…
A: We are going to solve for Socially optimum level of emissions to answer this question.
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- Analyze the relationship between negative externalities and inefficient overproduction
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- Consider two firms with the following marginal abatement cost (MAC) functions: MAC₁ = 12 - 2E₁ MAC2 = 8 - E₂ Assume that marginal external damages (MED) from the aggregate emissions of both firms (EA = E₁ + E₂) is: MED = 0.5EA. To achieve the socially efficient level of aggregate emissions (EA*) using a per-unit subsidy to abatement, the government must set the subsidy equal to $ Please round your final answer to two decimal places if necessary.Distinguish carefully between a positive externality and a negative externality. Explain your answer with an example of each. (needs to be at least 100 words )Identify a negative externality
- Explain why the private provision of public goods leads to an inefficient level of public goods.Homework (CIT TO) An externality arises when a firm or person engages in an activity that affects the wellbeing of a third party, yet neither pays nor receives any compensation for that effect. If the impact on the third party is adverse, it is called a externality. The following graph shows the demand and supply curves for a good with this type of externality. The dashed drop lines on the graph reflect the market equilibrium price and quantity for this good. Adjust one or both of the curves to reflect the presence of the externality. If the social cost of producing the good is not equal to the private cost, then you should drag the supply curve to reflect the social costs of producing the good; similarly, if the social value of producing the good is not equal to the private value, then you should drag the demand curve to reflect the social value of consuming the good. 10 Demand Supply 11 Supply ESC PRICE (Dollars per unit) 69°F Cloudy F1 F2 CO- F3 0+ F4 F5 A r F6 A i T CI 4- F8 M+ F10…Provide examples of public goods or externalities that are provided successfully by market or contractual arrangements.
- Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC_1 = 11 - 2E_1 MAC_2 = 8.5 - E_2, and assume marginal external damages (MED) from the aggregate emissions of both firms (E_Agg = E_1 + E_2) is: MED = .5E_Agg. To achieve the socially efficient level of aggregate emissions (E*_Agg), the government institutes a per-unit tax on emissions. In principle, firms could continue to emit pollution as they were in the absence of government intervention, but by cutting back on emissions, their total compliance costs (tax payment plus total abatement costs) goes down. How much money can firms save if they reduce their emissions to E*_Agg in response to the tax? Answer:Consider the positive externality graph If firms are able to ignore the benefit to society, which of the following statements is correct? Price ($) P* P₁ Private 0 Qp Private MSC MSB Dprivate Quantity (in units)The coase theorem is an effective way of solving both positive and negative externality problems. True or false, and explain
- Which of the following is NOT a possible way of solving an externality problem of electricity production using coal? A. A quota of electricity production using coal exactly equal to the production level in the socially optimal allocation. B. A ban on coal burning, in order to force the use of alternative energy sources. C. Issue trading rights to burn coal for electricity production, and let a market decide the clearing price for those rights. D. A per-unit tax on the electricity price equal to marginal external cost of burning coal at the socially efficient allocation.Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC_1 = 11 - 2E_1 MAC_2 = 8.5 - E_2, and assume marginal external damages (MED) from the aggregate emissions of both firms (E_Agg = E_1 + E_2) is: MED = .5E_Agg. To achieve the socially efficient level of aggregate emissions (E*_Agg), the government institutes a per unit subsidy to abatement equal to $____. Answer:Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC_1 = 24 - 2E_1 MAC_2 = 20 - E_2, and assume marginal external damages (MED) from the aggregate emissions of both firms (E_Agg = E_1 + E_2) is: MED = 2E_Agg. To achieve the socially efficient level of aggregate emissions (E*_Agg), the government institutes a cap and trade policy and sets the cap equal to the socially efficient level of emissions (E*_Agg). If firm 2 is initially grandfathered 5 permits, it will buy more permits. (Note: your answer can be positive or negative; if it is positive, the firm is buying additional permits; if it is negative, the firm sells permits. So, for example, an answer of -10 implies that the firm sells 10 permits)
