b. Can the total abatement cost be lowered by requiring unequal pollution reductions from theFirms, while still maintaining a total pollution reduction of 10? Show the total cost for reductionsof 6 and 4 units, 7 and 3 units, etc., for Firms 1 and 2 respectively. An important question in economics is how to minimize the total cost of pollution reduction (calledthe abatement cost, which is considered a "cost to society"). Two companies, Fim 1 and Firm 2,each emit 10 units of pollution per year. The table below shows the total cost for each company toreduce its pollution to a given value x. Due to technology differences, is more expensive for Fim2 to reduce pollution than for Firm 1. When x = 10, no abatement has occurred (it is "business asusual"); when x = 0, no pollution is emitted.The table also shows an algebraic formula for each abatement cost. (BTW, it is a commoneconomic approximation that abatement cost goes up quadratically.)Below, we solve this for two firms, but the method is applicable to a situation with multiple firms.Per-firm pollution emissions xFirm 1 total abatement cost = (10-x)where x is the amount of pollutionFirm 2 total abatement cost = (20-2x)where x is the amount of pollution1.3.4.9.7.8.6.101008164493625169.4.4003242561961441006436164.

Abatement cost is the cost incurred in pollution reduction. When x is 10, the abatement level is…

b. Can the total abatement cost be lowered by requiring unequal pollution reductions from the Firms, while still maintaining a total pollution reduction of 107 Show the total cost for reductions of 6 ond 4 units, 7 and 3 units, etc., for Firms 1 and 2 respectively

b. Can the total abatement cost be lowered by requiring unequal pollution reductions from the Firms, while still maintaining a total pollution reduction of 107 Show the total cost for reductions of 6 ond 4 units, 7 and 3 units, etc., for Firms 1 and 2 respectively

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter17: Externalities And The Environment

Section: Chapter Questions

Problem 5QFR

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