Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC_1 = 22 - 2E_1 MAC_2 = 10 - E_2, and assume marginal external damages (MED) from the aggregate emissions of both firms (E_Agg = E_1 + E_2) is: MED = .5E_Agg. To achieve the socially efficient level of aggregate emissions (E*_Agg), the government institutes a per unit tax on emissions.  The per-unit tax on emissions is $____. Answer:

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A:

Q: Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E):…

A:

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Q: Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E):…

A: Abatement costs: refers to the cost of reducing environmental negatives like pollution. Marginal…

Q: The marginal social cost (MSC) of an electricity generating plant that uses coal is estimated by a…

A: Given information MSC=3Q MPC=Q P=60-2Q

Q: Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E):…

A: MAC1 = 11 - 2E1 MAC2 = 8.5 - E2 MED = 0.5EAgg

Q: Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E):…

A: We are going to solve for Socially optimum level of emissions to answer this question.

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A:

Q: Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E):…

A: Please find the images attached for detailed explanation

Q: Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E):…

A: MAC1 = 11 - 2E1 MAC2 = 8.5 - E2 MED = 0.5EAgg

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Q: Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E):…

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Q: what is the market price?

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Q: Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E):…

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Market Failure Analysis

To understand Market failure, we need to first understand welfare economics. An Italian economist, Vilfredo Pareto stated that allocation of resources in an efficient manner such that an economic change, which harms no one and makes someone better off, indicates an increase in social welfare. It is also called Pareto Optimality, where resources cannot further be reallocated without harming one. This does not apply to those economic changes, which harm some and benefit others. social welfare increases if the utility of any of its members' increases and none decrease in the economy.