Exton and Shill are 2 firms that can control emissions at the following marginal costs: MC1 = 400q1, MC2 = 200q2, where q1 and q2 are the amount of emissions reduced by Exton and Shill, respectively. Assume that with no control at all, each firm would be emitting 25 units of emissions. Estimate the cost-effective allocation of emissions control needed if a total reduction of 30 units of emissions is necessary.

Exton and Shill are 2 firms that can control emissions at the following marginal costs: MC1 = 400q1, MC2 = 200q2, where q1 and q2 are the amount of emissions reduced by Exton and Shill, respectively. Assume that with no control at all, each firm would be emitting 25 units of emissions. Estimate the cost-effective allocation of emissions control needed if a total reduction of 30 units of emissions is necessary.

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

Chapter15A: Auction Design And Information Economics

Section: Chapter Questions

Problem 12E

See similar textbooks

Similar questions

Respond to the question with a concise and accurate answer, along with a clear explanation and step-by-step solution, or risk receiving a downvote. n the table below are the marginal abatement costs of two firms. Note that an entry in the table indicates the cost of reducing emissions by one unit from the previous level. For example, $104 is the additional abatement cost for Firm 1 to reduce its emissions from 3 tons to 2 tons, and $40 is the cost for Firm 2 to reduce its emissions from 7 tons to 6 tons. 1.In an unregulated environment each firm produces 10 tons of emissions (20 tons total). Using the table above, what emissions levels (i.e., emissions standards) would you assign if you wanted to limit aggregate emissions to 7 tons in a cost-effective manner? Firm 1’s emissions level ________________ Firm 2’s emissions level ________________ 2.Given the emissions levels from Question 1, calculate the total abatement cost for each firm? Firm 1’s total abatement cost ________________…
Appalachian Coal Mining believes that it can increase labor productivity and, therefore, net revenue by reducing air pollution in its mines. It estimates that the marginal cost function for reducing pollution by installing additional capital equipment is MC = 40P where P represents a reduction of one unit of pollution in the mines. It also feels that for every unit of pollution reduction, the marginal increase in revenue (MR) is MR = 1,000 - 10P How much pollution reduction should Appalachian Coal Mining undertake?
Suppose there are 100 farmers each with 10 acres that overlie a common groundwater aquifer. They all have identical farmland that is more productive if wells are used to pump the groundwater for irrigation. They all face a marginal cost of $10 per well. The average productivity (in $ of crop output) of the wells of the common aquifer is given by AP = 100 – W where W is the number of wells drilled into the aquifer. 1a. Assume farmers act on their own how many wells will be drilled and how much rent will the aquifer generate. A. 45; 2025 B. 90; 2025 C. 60; 1000 D. 90; 0 E. 45; 0 F. None of the above
Consider a market with two polluting firms with linear marginal abatement cost curves. Firm B has increasing marginal abatement costs that are everywhere half as high as Firm A’s marginal abatement costs. The maximum amount of pollution that can be tolerated is less than the total these two firms would emit if their pollution was unrestricted. Thus some aggregate amount of abatement is necessary. The pollutant in question is uniformly mixing, so it doesn’t matter which firm cuts back how much, only that between them, they cut back by the required total amount. The environmental agency decides to solve the abatement allocation problem by giving out pollution permits in amounts such that each firm would be obliged to cut back their emissions by an equal amount. Would this be “fair”? Would it be “efficient”?
Consider a rent-seeking game with N ≥ 2 contestants. The effort for person i is denoted by xi for i = 1; ... ; N. The cost per unit of effort is C. All contestants are identical. They value the rent at V and each contestant can win the prize with a probability equal to their effort relative to the total effort of all contestants. Thus the payoff function of person i exerting effort xi is given by Exercise 11.10 Three firms have applied for the franchise to operate the cable TV system during the coming year. The annual cost of operating the system is $250 and the demand curve for its services is P = 500 - Q, where P is the price per subscriber per year and Q is the expected number of subscribers. The franchise is assigned for only one year, and it allows the firm with the franchise to charge whatever price it chooses. The government will choose the applicant that spends the most money lobbying the government members. If the applicants cannot collude, how much will each spend on…
Suppose that under the United States-Canada Air Quality Agreement, both countries agree to a combined 30 percent SO2 abatement standard. Further assume that the following SO2 abatement cost functions have been estimated by each country: TACUS = 500 + 1.5(AUS)2 MACUS = 3 AUS TACCAN = 1000 + 3(ACAN)2 MACCAN = 6 ACAN A. If the countries implement a uniform abatement standard, find the resulting values of TAC and MAC for each nation. Based on these values, is there an economic incentive the two nations to participate in an emissions trading program? Explain. B. Assuming a trading program is enacted, find the cost savings associated with a cost-effective abatement solution? C. What must be the price of a tradeable permit to achieve the cost-effective abatement allocation?
Following are the marginal abatement costs of three firms . Suppose each firm is currently emitting 10 tons / week , so the total emissions are 30 tons / week . Suppose we wish to reduce total emissions by 50 % , to 15 tons per week . The following table provides marginal abatement costs for each firm . a ) What is the total cost if each firm cuts total emission by 50 % from their current levels . b ) What is the total cost if the total emissions decrease by 50 % ( to 15 tons per week ) that meets the equi - marginal principle . c ) From the society's point , which method of reducing ( a or b above ) emissions is better ? Provide a reason .
Considering the actors (i.e., two shipping lines and the port authorities) and the predetermined cost functions described below (i.e., transportation costs and port fees), and determine the equilibrium outcome (price, quantity, and profit) of the game. Let qi for i = 1 and 2 denote the number of containers transported by shipping line i. Assume a standard inverse demand function for a container of the form P = 20 000 − (q1 + q2) , and a total transportation cost function, excluding fixed costs, of the form TC = 200qi + (dt/2)*qi2 for i = 1,2, and t=low, high, representing low and high diseconomies of scale, i.e. dlow < dhigh. When both shipping lines choose the port of Gothenburg, which is characterized by low diseconomies of scale, each vessel incurs a lump sum of €1200 in port fees. In the case when both vessels choose the port of Helsingborg, which is characterized by high diseconomies of scale, each vessel incurs €1000 in port fees. Lastly, when the shipping lines choose…
In a cap-and-trade program that covers only two firms, suppose Firm A has linear marginal abatement costs that are twice as high as Firm B’s linear marginal abatement costs. Permits are handed out so that both firms need to reduce their emissions to meet their cap. With the initial allocation of permits, Firm A and Firm B are each required to do half of the total required abatement. Given this starting point: a.) Neither firm will be seeking to buy permits, because the initial allocation happens to be the least-cost allocation of abatement responsibility. b.) Firm A will be seeking to buy permits and Firm B will be willing to sell some. c.) Firm B will be seeking to buy permits and Firm A will be willing to sell some. d.)Both firms will be seeking to sell permits.
The second-largest public utility in the nation is the sole provider of electricity in 32counties of southern Florida. To meet the monthly demand for electricity in these counties,which is given by the inverse demand function P = 1,200 − 4Q, the utility companyhas set up two electric generating facilities: Q1 kilowatts are produced at facility 1 andQ2 kilowatts are produced at facility 2 (so Q = Q1 + Q2). The costs of producing electricityat each facility are given by C1(Q1) = 8,000 + 6Q12 and C2(Q2) = 6,000 + 3Q22,respectively. Determine the profit-maximizing amounts of electricity to produce at thetwo facilities, the optimal price, and the utility company’s profits. (LO1, LO8)
The cost of reducing lead contamination of water for BigManufacture Inc. is shown in the table below. BigManufacture Inc currently releases lead in to the local waterways at a concentration of 5 parts per billion. The government regulations sets a limit to the lead pollution at 2 parts per billion accompanied by a $30,000 fine per year for each part per billion beyond the 2 part limit. What is BigManufacture Inc likely to do? Reduction of Lead Cost By 1 part per billion $20,000/year By 2 parts per billion $45,000/year By 3 parts per billion $80,000/year Group of answer choices Reduce lead pollution by 1 part per billion. Reduce lead pollution by 2 parts per billion. Reduce lead pollution by 0 part per billion. Reduce lead pollution by 3 parts per billion.
Suppose that two European electronics companies, Siemens (Firm S) and Alcatel-Lucent (Firm T), jointly hold a patent on a component used in airport radar systems. - Demand for the component is given by the following function \[ P=1,000-Q \] - The total cost functions of manufacturing and selling the component for the respective firms are \[ \begin{array}{c} T C_{S}=70,000+5 Q_{S}+0.25 Q_{S}^{2} \\ T C_{T}=110,000+5 Q_{T}+0.15 Q_{T}^{2} \end{array} \] Assume that the firms agreed to form cartel and calculate the joint profit.