Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 19.4, Problem 1ST
To determine
Calculate socially optimal or efficient outcome.
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The marginal damage cost equation for carbon monoxide (CO) in urban areas is: MDCU = 36E;
The marginal damage cost equation for CO in rural areas is: MDCR = 6E.The marginal abatement cost equation for CO is: MAC = 400 - 4E
What are the socially efficient individual standards for carbon monoxide?
What is the total abatement cost in each area under this scheme?
What is the total compliance cost under this scheme?
Which one of these elements of the total cost of a product are not generally taken
into account, resulting in the externality:
Cost to meet regulations, pay taxes, etc., per product
Cost of Product (over its lifecycle) to the
Cost to society that is not captured in the product price or government
regulation
Suppose the marginal damage cost is estimated to be MD
= 0.8E and the marginal abatement cost is estimated to be
MAC = 90 - E. Find the following: a) The socially efficient
level of emission b) How much emission could be reduced
from the uncontrolled level? c) the Total Social Costs d)
Draw the graphs and show your calculations.
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