suppose the regulator imposes a Pigouvian tax on each unit of emissions. Calculate each firm's emissions level and the total tax collected. Three firms in a single industry are the only source, in a given airshed, of emissions ofa uniformly mixed pollutant, say, CO₂. Their emissions levels are currently e₁ = 300,e₂: = 200, and e3 = 100, where the subscript denotes firms. The environmental regulatorhas decided that emissions should be reduced by half, to E=300. The firms' abatementcost functions are given by C₁ (a₁) = 0.1a1, C₂(a₂) = 0.2a2, and C3 (a3) = 0.3a3respectively. (It is assumed that these functions describe the firms' entire cost structure,including the cost of producing the optimal level of output given e.) Enforcement costsare zero and there is no uncertainty.

Pigovian Tax is a tax on activities that generate negative externalities or costs to society. The…

hree firms in a single industry are the only source, in a given airshed, of emissions of uniformly mixed pollutant, say, CO₂. Their emissions levels are currently e₁ = 300, 2 = 200, and e3 = 100, where the subscript denotes firms. The environmental regulator as decided that emissions should be reduced by half, to E=300. The firms' abatement ost functions are given by C₁(a₁) = 0.1a, C₂(a₂) = 0.2a2, and C3 (a3) = 0.3a3 espectively. (It is assumed that these functions describe the firms' entire cost structure, ncluding the cost of producing the optimal level of output given e.) Enforcement costs re zero and there is no uncertainty.

hree firms in a single industry are the only source, in a given airshed, of emissions of uniformly mixed pollutant, say, CO₂. Their emissions levels are currently e₁ = 300, 2 = 200, and e3 = 100, where the subscript denotes firms. The environmental regulator as decided that emissions should be reduced by half, to E=300. The firms' abatement ost functions are given by C₁(a₁) = 0.1a, C₂(a₂) = 0.2a2, and C3 (a3) = 0.3a3 espectively. (It is assumed that these functions describe the firms' entire cost structure, ncluding the cost of producing the optimal level of output given e.) Enforcement costs re zero and there is no uncertainty.

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:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 2.2CE

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