Firms within the country of Anviliania are currently emitting pollutants. These pollutantscause damages within Anviliania. However, the pollutants also cause damages to theproperties and health of residents of countries that share borders with Anviliania.The Marginal Abatement Costs of the firms in Anviliania can be represented by theequationMAC(Anvil.) = 750 -2.3 eThe Marginal Damage Costs to the residents of Anviliania are given byMDC (Anvil.)=-- 40 + 10 eThe Marginal Damage Costs to all residents (including the residents of Anviliania) areMDC (Globe) = -20+ 12 ea. Draw a diagram representing this situation.b. Determine the magnitude of the local market failure and the global market failure.c. Suppose that the Anvilianian government has given production subsidies to the firms inAnviliania. As a result, the firms have increased production (and the number of firmshave increased.). Consequently, the aggregate MAC is nowMAC' (Anvil.) = 800 - 2.3 e.Determine the magnitude of the intervention failure.

To analyze the situation presented in the image, we should address the three tasks step by step:1.…

Answered: Firms within the country of Anviliania…

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter28: Antitrust And Regulation

Section: Chapter Questions

Problem 7E

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