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- Explain rate of return regulation and price cap regulation. What are the major implications of these models for public utilities? How do these pricing approaches affect the price consumers pay for the utility services?It has been estimated that privately run buses, trains, and subways are about 10 percent cheaper, on a per rider basis, than the same transportation if government run. Is public transportation a public good? On this basis, would you recommend that public transportation be privatized? What additional information would you want to make this decision?The annual market marginal demand curve for electricity is MB=400-1.5Q. The annual marginal cost curve is MC=50+Q. The government is considering whether to build one of three plants. The first will have a maximum production capacity of 50 units of Q; the second a maximum capacity of 100 units, and the third, a maximum capacity of 200 units. Plants need to be operated at maximum capacity; otherwise, excess investment cost (not depicted in the diagram) will be incurred. Given this background: What is the annual benefit of the 50-unit plant? What is the annual cost? What is the annual net benefit?
- How is the Legal Charge and the violation of EPA Clean Water Act that relate to the deepwater horizon of BP oil?Consider a proposal to privatize street lighting.Would this be feasible? Why or why not? Doesstreet lighting suffer from a tragedy of the commons problem?We are all concerned with the serious health impacts of the escalating pollution problem in a country like India where regulation oversight is comparatively lax and penalties & punishments too few and far? Identify and select any one pollution reducing/mitigating initiative practiced and embedded in its business by a listed company that impresses you. Explain this initiative along with the short term & long term positive impact of the same on the environment & people. (refer to Sustainability Report and/or Business Responsibility Report of the company).
- The figure below shows Marginal Damage from emissions, the regulator’s BELIEF about the aggregate marginal abatement cost (MAC) and the TRUE aggregate marginal abatement cost that is unobservable by the regulator. Use the figure to answer Questions 20 – 23. [20] Suppose the regulator issued E1 permits to the industry. What is the competitive market permit price? [21] Suppose the regulator issued E1 permits to the industry. What area(s) represent the welfare loss due to the uncertainty in aggregate marginal abatement costs? [22] Suppose the regulator uses its BELIEF about the AMAC function to achieve efficient emissions control using a per-unit uniform emissions tax. a) What per-unit tax would the regulator set? b) What level of aggregate emissions would result given the regulator’s tax? [23] Suppose the regulator uses its BELIEF about the AMAC function to achieve efficient emissions control using a per-unit uniform emissions tax. a) What area(s) represent the welfare loss due to the…In order to evaluate the relative advantages of taxes or emissions standards in the face of asymmetric information, suppose that the regulator has an imperfect estimate but cannot exactly observe the firm's abatement cost. More precisely, suppose that the marginal abatement cost estimated by the government is MCA = 2A but the actual marginal cost is MCA = 2A+10. Moreover, suppose that the marginal benefit of abatement MBA is known by the government. Consider the following two extreme scenarios: (i) MBA is vertical at A = 30 and (ii) MBA = 60 at every A (so it is horizontal at 60). For each one of these cases, obtain the Pigouvian Tax t⁰ and the Emissions Standard A⁰ that the government would impose based on estimated abatement costs, provide graphical representations, and calculate respective deadweight losses. Can you intuitively draw some conclusion about the type of industries in which taxes are preferred to standards and vice versa.Use the following information to answer Questions 14 – 18. Consider an industry of 2 firms with the following marginal abatement cost functions: MAC1 = 300 – 30e1 MAC2 = 500 – 20e2 [14] What is the aggregate level of emissions without regulation? [15] How much should a regulator allow each firm to emit to limit aggregate emissions to 20 tons cost-effectively? Firm 1 _____ Firm 2 ________ [16] What tax should the regulator set to achieve an aggregate emissions level of 20? [17] Calculate the total abatement cost for both firms of reaching the aggregate emissions level of 20 tons via the tax? Don’t include the tax payments. Firm 1’s Total Abatement Cost _______________ Firm 2’s Total Abatement Cost _______________ [18] Suppose you want to limit aggregate emissions to 20 tons with a competitive tradeable emissions permit system. If Firm 1 is given 5 permits and Firm 2 is given 15 permits, after trading how many permits will each firm end up with? Firm 1 _________ Firm 2 __________
- Suppose that a firm's marginal abatement cost function with existing technologies is MAC = 16 - 2E. If the firm adopts new pollution abatement technologies, then its marginal abatement cost function will become MAC = 8 - E. If the government raises the emissions tax from $2 to $3, then the benefits of adopting the new technologies increase by $____. (Hint: recall that the benefits from adopting new technologies are simply the difference in total compliance costs.) THE ANSWER IS NOT 2 or 1.75 Might be 1.25 or 4.50The Swedish Environmental Protection Agency investigates how emissions of an environmentally hazardous substance from an industrial sector should be regulated, either through a tax on the emissions or through a quantitative regulation (limit value). As this is a new substance (new substance), knowledge of the level of environmental damage and the costs of reducing emissions is uncertain. In more technical terms: the regulatory authorities do not have complete information on the positions on either the dD / dM curve (marginal damages) or the MAC curve (marginal abatement costs). a) Explain and show graphically whether - and if so how - the uncertainty about the position of the MAC curve affects the choice between regulating emissions with a tax or limit value from a socio-economic efficiency perspective. b) Explain and show graphically whether - and if so how - the uncertainty about the position of the dD / dM curve affects the choice between regulating emissions with a tax or limit…What roles does economics play in California energy regulation?.