Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC_1 = 33 -3E_1 MAC_2 = 8 - 2E_2, and assume marginal external damages (MED) from the aggregate emissions of both firms (E_Agg = E_1 + E_2) is: MED = 2E_Agg In the absence of government intervention, total external damages (TED) ar

Given the following information:  Initially, a perfectly competitive market for a product is in equilibrium, with an upward-sloping straight-line market supply curve, a downward-sloping straight-line market demand curve, and a market price of $30 per unit.  Consumption of this product causes pollution.  Initially, the marginal external cost of the pollution caused by consuming the product is $9 per unit.  There is no government policy toward the externality. The government then mandates a shift to a new product version, and all firms adopt and produce the latest version.  Consumers view the new product version as equally as good as the initial product version. Consumption of the new version of the product causes less pollution, and the marginal external cost decreases by $3 per unit.  For each firm, production of the new product version does not change fixed cost, but it does increase average variable cost by $3 per unit. If necessary, the market adjusts to a new equilibrium.  There is…

Calculate private market equilibrium and the socially optimal equilibrium for the following negative production externality. (note: demand and supply functions are already in the inverse format) Demand: P = 100 - Q Supply: P=-50 + 2Q Marginal External Cost: MEC = 2Q Private Market Equilibrium = Socially Optimal Equilibrium = (enter your responses rounded to a whole number)

Imagine a firm’s marginal abatement cost function with existing technologies is: MAC = 100 – 2E. If the firm adopts new pollution abatement technologies, its marginal abatement cost function will be: MAC = 50 – E.  If the government raises the tax on emissions from $4 to $12, the benefits of adopting the new technologies increase by $____

The supply and demand of sugar are given as           Qs = 5P,  Qd = 250- P   where Qs is tons supplied per year, P is the price per ton; Qd is tons demanded per year. Because of the pollution associated with production, marginal external costs of 40 are associated with each ton of sugar.  Assuming that sugar is sold in a competitive market,   What is the market price? How many tons of paper will be produced per year at that price? What is the efficient output of paper? What is the amount of total Pigouvian tax to achieve efficiency? What is the amount of total Pigouvian subsidy to achieve efficiency?

Consider a market where the demand curve is given by P = 190 – 0.2Q and the supply curve is given by P = 41 + 0.1Q. Production of this good generates an external cost as measured by the marginal external cost function MEC = 0.1Q. If the government wants to encourage firms to produce at the socially efficient level of output then how large should the per unit tax be? Enter a number rounded to two decimal places as necessary

Graphically analyze the effect that a revenue neutral carbon tax has on the consumption of carbon intensive goods.

The supply and demand of sugar are given as           Qs = 5P,  Qd = 250- P   where Qs is tons supplied per year, P is the price per ton; Qd is tons demanded per year. Because of the pollution associated with production, marginal external costs of 40 are associated with each ton of sugar.  Assuming that sugar is sold in a competitive market,   What is the market price? How many tons of paper will be produced per year at that price? What is the efficient output of paper? What is the amount of total Pigouvian tax to achieve efficiency? What is the amount of total Pigouvian subsidy to achieve efficiency?

this is question one for reference

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