ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Assume the Senator asks you of the optimal policy to combat CO2 emissions (carbon emissions). The senator is interested in implementing a policy that will reduce emissions from the power sector.
The demand for electricity is P = 20 - 2 x Q
where Q is amount of electricity demanded, and P is the price of electricity in MWh. The marginal cost of producing electricity is
MC = 2 x Q
And the damage caused by pollution is
MEC = Q
what is the pigouvian tax
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