Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 17, Problem 2.4CE
To determine
The better option from a) an optimal carbon tax or b) carbon trading.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
The MD and MAC curves below represent damage and abatement cost functions for
a firm liable for damages caused by its emissions. Suppose the firm cleans up its
emissions so as to minimize the sum of its abatement cost and compensation
payment. What would be its total cost? Copyrighted material. Not to be shared.
$15
MAC
10
25
MD
A
Emissions
(tonnes/month)
There is a company that emits a moderate amount of fossil fuel emissions. It would cost them 10 dollars to reduce emissions by 1 tonne, an additional 15 dollars to reduce emissions by a second tonne, an additional 25 dollars to reduce emissions by a third tonne, an additional 30 dollars to reduce emissions by a fourth tonne, and an additional 100 dollars to reduce emissions for a fifth tonne. If the price for a 1 tonne of emissions in a cap-and-trade program is 25 dollars, how many tonnes of emissions is the company likely to reduce?
a. one tonne
b. two tonnes
c. three tonnes
d. four tonnes
c. 5 tonnes
A firm has a marginal emissions benefit of 100-0.5*E in each of 2 years,
where E measures emissions in tons. The marginal cost of emissions to
society is 75/ton. The discount rate is 10% and the marginal cost of
emissions also grows at 10% per year.
The government decides to give the firm permits to emit 50 tons of
emissions per year, but allows the firm to "bank" or "borrow" permits across
the two years so that this effectively acts as a 100 ton cap on emissions over
2 years. How much will the firm emit in each year? If all firms are identical to
the one you analyze here, is the government issuing too many or too few
emission permits relative to the efficient level? How do you know?
Chapter 17 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Knowledge Booster
Similar questions
- Owning, operating, and maintaining an automobile carries with it private internal costs to the driver, as well as public external societal costs. List five internal and external costsarrow_forwardWhich of the following are practical and effective policies to deal with carbon emissions caused by driving a car? A) A quota on individuals to limit their driving B) A tax on petrol C) Ownership of all affected assets D) Coasian bargaining (one side paying the other side to drive or not to drive)arrow_forwardwhen left the treat environment as if it has no value the polluters in region release collective 500 tons of pollutant per year. The damages from this pollutant are MD=10e while aggregate abatement cost is MAC=10+5a. Calculate; A)efficient aggregate levels of abatement and emissions B)use calculations to show that a one ton increase or decrease in emissions would not be efficientarrow_forward
- What are the pros and cons of using an environmental impact analysis, an economic impact analysis, or cost-effectiveness analysis? Thank you!arrow_forwardIs the Benefit-cost analysis a decision-making tool for systematically developing useful information about desirable and undesirable effects of public projects? How?arrow_forwardUnder emission standards, the amount of compliance cost faced by a polluter is ___________________________? The total abatement costs Zero The sum of the compensation and abatement costs The compensation based on damages caused by the polluterarrow_forward
- Describe the key symmetry between a pollution emissions tax and an emissions trading scheme. Outline some reasons you might wish to choose one approach in favour of the other when dealing with an emissions-reduction problem.arrow_forwardDraw a diagram of the marginal abatement cost curve described by: MAC = 100 - 2E. What is the uncontrolled level of emissions? What is the marginal abatement cost of the 40thunit of abatement? What is the total abatement cost of 40 units of abatement?arrow_forwardA company's marginal costs for emission reduction (MAC) can be expressed as MAC = 2A, where A is abatement in tonnes. MAC is expressed in USD. Assume that the company's total emissions inthe starting position is 100 tons. a) Assume that the authorities now decide on a limit value which means that the company may not emit more than 30 tonnes. What is the total cost for the company to live up to this limit? b) A research team consisting of both ecologists and economists concludes that the marginal benefit (per tonne) of reducing emissions is constant and equal to USD 100. How high is the socio-economically optimal level of emissions (for the individual company) given thisinformation? c) Assume that a system for trading in emission rights is established. The company in question is allocated 30 emission rights (where each right corresponds to one tonne). If the price of emission rights is USD 120 (per tonne), will the company be a buyer or a seller of emission rights and if so, how many…arrow_forward
- Proposed sustainability measures for Palaui Islandarrow_forwardSummarize the economic and environmental benefits of the City of Kelsey energy efficiency policy.arrow_forwardConsider being tasked with conducting a cost-benefit analysis of a potential coal-fired power station. A specific amount of pollutants will be released from the facility, which will be erected on the fringes of a residential area. Its cooling system will require a considerable volume of water. Industries in the area claim that the extra electricity is urgently needed, while locals are against the building. How would you assess the economic benefits vs the social and environmental costs?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning