Suppose the following functions represent the marginal abatement cost (MAC) and marginal damage (MD) functions of an electricity generation plant emitting Sulphur Dioxide. MAC = 60 – 4E MD = 2E E represents the level of emissions, measured in tons per month. Currently, there is no emission control, and no abatement occurs.
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- Draw 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?The Upstream Nukem Co. uses a technology that produces pollutants as a by-product. The company dumps these pollutants into Radiant River. The only way that Nukem can reduce pollution is by cutting output. Nukem's profits, expressed as a function of the amount æ (in tons) of pollutants per day, is IIN(x) = 80x - 5x² The pollution adversely affects the performance of Downstream Glowing Fisheries. Glowing's profit, as a function of the quantity of pollution, is given by IIG(x) = K - 5x² where K is a constant relating to all factors other than pollution. (i) If there are no restraints on pollution and no negotiations between the two companies, how much pollution will Nukem produce per day? x =. O 10 8 06 O 4 02 (ii) What is the socially optimal quantity of pollution? * 02 O 4 O 3 O 1 05 ||The Upstream Nukem Co. uses a technology that produces pollutants as a by-product. The company dumps these pollutants into Radiant River. The only way that Nukem can reduce pollution is by cutting output. Nukem's profits, expressed as a function of the amount x (in tons) of pollutants per day, is IIN (x) = 80x - 5x² The pollution adversely affects the performance of Downstream Glowing Fisheries. Glowing's profit, as a function of the quantity of pollution, is given by IIG(x) = K - 5x² where K is a constant relating to all factors other than pollution. (i) If there are no restraints on pollution and no negotiations between the two companies, how much pollution will Nukem produce per day? x =. 10 8 ОС 4 2 (ii) What is the socially optimal quantity of pollution? x* = 1 5 со ст 3 O 2
- To model the effects of a carbon tax on CO2 emissions, policymakers study the marginal cost of abatement B(x), defined as the cost of increas- ing CO2 reduction from x to x +1 tons (in units of ten thousand tons- Figure 4). Which quantity is represented by the area under the curve over [0, 3] in Figure 4? B(x) ($/ton) 100 75 50+ 25- 1 3 Tons reduced (ten thousands) FIGURE 4 Marginal cost of abatement B(x).DNPS9.2(a) The market for dry cleaning is reflected by the demand and supply curves (Q is in thousands): Pa = 5-Q Ps= 2 + 2Q Producing dry cleaning creates ground water pollution with a constant marginal external cost of 1.2. (Hint: Think about this graphically and algebraically like a per-unit tax.) (a) Sketch a Graph that shows the Dsoc, Spriv, Ssoc, Qopt (Societal Perspective) & Deadweight Loss (DWL) in an Unregulated Market?Suppose MAC functions for two firms, Firm 1 and Firm 2, are MAC₁= 60-2E₁and MAC₂-48-3E2 respectively. (i) Suggest the (socially) cost-effective way to set emission standards for the two firms to reduce their combined level of emissions to 20 units. [Note that we want only 20 units of emissions from the two firms at the end.] (ii) What is the sum of the abatement costs (or total social compliance costs) when emissions are reduced from the two firms to 20 units in the socially cost-effective manner by using emission standards. [This is related to part (i).] (iii) What emission tax rate applied simulataneously to the two firms reduces the combined level of emissions to 20 units from the two firms just as the cost-effective way to set standards? [This question needs to answered based on your answer(s) to part (ii).]
- Which 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)Consider an industry with two firms that emit a uniformly mixed air pollutant (e.g., carbon dioxide). The marginal abatement cost functions for Firm 1 and Firm 2 are: MAC1 = 100 - e1 MAC2 = 100 - 4e2 Aggregate emissions for the industry are denoted as E = e1 + e2. [1] In an unregulated environment how many units of emissions does each firm emit? Firm 1’s unregulated level of emissions ____________ Firm 2’s unregulated level of emissions ____________ Total unregulated level of emissions ______________Consider an industry with two firms that emit a uniformly mixed air pollutant (e.g., carbon dioxide). The marginal abatement cost functions for Firm 1 and Firm 2 are: MAC1 = 100-e1 MAC2 = 100-4e2 Aggregate emissions for the industry are denoted as E = e1 + e2. [1] In an unregulated environment how many units of emissions does each firm emit? Firm 1’s unregulated level of emissions: Firm 2’s unregulated level of emissions: Total unregulated level of emissions: Suppose a regulator has a goal of reducing the total level of emissions from the amount from the amount you answered in [1] to 25 units. The regulator would like to achieve the goal of 25 units of total emissions in a cost-effective way. To do so it issues 25 permits, 10 are given to Firm 1 and 15 are given to Firm 2. A firm can only emit a unit of pollution if they have a permit for that unit, otherwise they must abate. After the permits are allocated, firms are allowed to buy or sell…
- For a marginal damage cost function equal to: MD = 0.8E, the marginal damage cost of the 50th unit of emissions is _______.Suppose we are happy with the current level of total emissions across two firms but, the current marginal abatement cost for firm 1 is $200 and the current marginal abatement cost for firm 2 is $250. Have we divided total emissions in the best way? Why or why not?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)