Suppose the marginal cost of pollution abatement is constant and equal to 10 percent of GDP for each 10 percent increase in pollution control. Given the following data for a $10 trillion economy, answer two questions, Level of Pollution Abatement (%) 0 (no pollution control) 10 20 30 40 50 60 70 80 90 100 (zero emissions) Marginal Benefit (5 trillions) 2.0 1.7 1.3 1.0 08 06 04 03 02 0.1 Instructions: Enter your responses based on the percentage values provided in the table a. Identify the optimal rate of pollution abatement Now suppose that the marginal costs of pollution abatement decrease to 6 percent of GDP for each 10 percent increase in pollution control because of improved pollution control technology and more efficient sources of renewable energy b. Identify the new optimal rate of pollution abatement

Suppose the marginal cost of pollution abatement is constant and equal to 10 percent of GDP for each 10 percent increase in pollution control. Given the following data for a $10 trillion economy, answer two questions, Level of Pollution Abatement (%) 0 (no pollution control) 10 20 30 40 50 60 70 80 90 100 (zero emissions) Marginal Benefit (5 trillions) 2.0 1.7 1.3 1.0 08 06 04 03 02 0.1 Instructions: Enter your responses based on the percentage values provided in the table a. Identify the optimal rate of pollution abatement Now suppose that the marginal costs of pollution abatement decrease to 6 percent of GDP for each 10 percent increase in pollution control because of improved pollution control technology and more efficient sources of renewable energy b. Identify the new optimal rate of pollution abatement

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Provide a reason why the marginal damages from some emissions may be increasing with the level of emissions (like in the figure above). Suppose the unregulated level of emissions is E3. What area(s) represent the total damages from unregulated emissions? Suppose emissions levels drop from E3 to E1. What area(s) represent the total benefits from the emissions reduction from E3 to E1? What point denotes the marginal damage from emissions at E2?
Imagine a firm's marginal abatement cost function with existing technologies is: MAC = 30 – 2E. If the firm adopts new pollution abatement technologies, its marginal abatement cost function will be: MAC = 15 – E. With a tax on emissions of $6, the benefits of adopting the new technologies are $_ Answer:
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5.
No hand written solution Afirm has an industrial plant that emits pollutants into a town’s lake. The plant’s marginal abatement function is MAC= 200 – 0.5E and damages caused by its emissions are given by MD = 2E where emissions are in kg. per day. What is the socially efficient level of emissions from this plant? Illustrate this in a graph. As an incentive to reduce emissions to the socially efficient level, government offers to pay the firm for each kg. of emissions it abates per day from this plant. What subsidy per kg. should the government offer? If the plant abates to the socially efficient level of emissions, what total subsidy payment would the firm receive? Identify the area in your graph. How much better or worse off would the firm be compared to if it did no abating? Identify the area in your graph. What would be the net benefit to society if we pay the firm to reduce the plant’s emissions to the socially efficient level? Identify this area in your graph.
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Imagine a firm's marginal abatement cost function with existing technologies is: MAC = 200 - 10E. If the firm adopts new pollution abatement technologies, its marginal abatement cost function will be: MAC = 100 - SE. With a tax on emissions of $20, the benefits of adopting the new technologies equal: Select one: a. $30. b. $20. c. $25. d. $50.
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