Suppose that two firms emit a certain pollutant. The marginal cost of reducing pollution for each firm is as follows: MC₁ = 300e and MC₂ = 100e2, where e and 2 are the amounts (in tons) of emissions reduced by the first and second firms, respectively. Assume that in the absence of government intervention, each firm generates 80 tons of emissions. Suppose that the regulator introduces a tradable permit system and issues 80 permits, each of which allows the emission of one ton of pollution, and each firm receives 40 permits. By how many tons does firm 1 end up reducing its pollution? Answer: 80

Suppose that two firms emit a certain pollutant. The marginal cost of reducing pollution for each firm is as follows: MC₁ = 300e and MC₂ = 100e2, where e and 2 are the amounts (in tons) of emissions reduced by the first and second firms, respectively. Assume that in the absence of government intervention, each firm generates 80 tons of emissions. Suppose that the regulator introduces a tradable permit system and issues 80 permits, each of which allows the emission of one ton of pollution, and each firm receives 40 permits. By how many tons does firm 1 end up reducing its pollution? Answer: 80

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter14: Environmental Economics

Section: Chapter Questions

Problem 3SQ: From an economic viewpoint, the optimal amount of pollution a. is zero because all pollution imposes...

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Economists sometimes shock noneconomists by stating that they do not favor the complete elimination of pollution. Explain the rationale for this position.
From an economic viewpoint, the optimal amount of pollution a. is zero because all pollution imposes costs on society. b. is that amount firms create when they maximize economic profits by setting their marginal private costs equal to market price. c. is that amount where the marginal social costs of producing a good precisely equals the price of the good. d. Both answers b. and c. are correct.
Assuming that firms hold well-defined rights to pollute and identifying (marginal) benefits and costs of pollution abatement, argue that a private market for abatement services is unlikely to exist when such services are a public good, defining relevant technical concepts as part of your answer. Illustrate your discussion in the context of an example in which the private marginal benefit of abatement to each one of 1000 victims of pollution is MBA = 0.020 (constant) and the marginal cost to polluting firms is MCA = A. (Hint: Obtain the abatement level private markets would provide and the socially efficient abatement level, obtaining first the marginal social benefit of abatement to the group of pollution victims).
Suppose a municipality votes to reduce the combined pollution introduced by three local companies. Presently, each firm creates 4 units of pollution in the area, for a total of 12 pollution units. The government can reduce total pollution in the area to 6 units by choosing between the following two methods:Methods to Reduce Pollution1. The government imposes pollution standards using regulation.2. The government issues tradable pollution permits.The costs faced by each firm are different, so it is more difficult for some firms to reduce pollution than others. The following table shows the cost faced by each firm to eliminate each unit of pollution. Assume that the cost of eliminating all 4 units of pollution (that is, reducing pollution to zero) is prohibitively expensive for all three firms.FirmCost of Eliminating the...First Unit of PollutionSecond Unit of PollutionThird Unit of Pollution(Dollars)(Dollars)(Dollars)Firm A 130 165 220Firm B 600 750 1,200Firm C…
Suppose the local authorities wanted to achieve a more drastic reduction in total pollution of 75 tons in the scenario described above. They want to do so via the introduction of a tradable pollution permits system whereby, each permit would allow a power plant to emit one ton of SO2 annually at no cost, but a power plant’s emissions may not exceed it’s permits. The authorities must will distribute 75 permits (to achieve the 150 - 75 = 75 ton reduction). Recall that prior to the policy, each plant is emitting 75 tons. (a) If the regulator issues 35 permits to firm 1 and 40 permits to firm 2, without trading, how much would each firm have to spend to comply with the regulation? Recall that each firm must abate the pollution for which they do not hold permits. i.e. q1 = 75 − p 1 where p 1 is the number of permits firm 1 has. (b) At this initial allocation, what is the marginal willingness to pay a permit for firm 1? What is the marginal willingness to accept to sell a permit for firm 2?…
Suppose there are 2 petrochemical companies that cause water pollution in the surrounding environment with marginal costs MC1 = 150e1 and MC2 = 50e2 (where e1 and e2 are the amount of waste in m3 reduced by company 1 and company 2). Initially, company 1 disposed of 50 m3 of waste and company 2 disposed of 40 m3 of waste. a. If the government wants to ensure the total waste is reduced by 20 m3 with a cost-effective approach, how much waste must each company reduce?
Assume citizens of Destrahan are complaining that Shell Chemical and Dow Chemical are polluting the environment. Currently, each firm emits 40 tons of pollution per year. Shell Chemical could reduce its pollution at a cost of $500 per ton, and Dow Chemical could reduce its pollution at a cost of $100 per ton. To reduce overall pollution to 40 units, the mayor gives each firm 20 tradable pollution permits. Each permit allows a firm to emit one ton of pollution. Assuming each permit has a market value is $200, what is the cost of reducing pollution to the desired level? a.$2,000 b.$4,000 c.$8,000 d.$10,000
please answer all. 5. Correcting for negative externalities - Regulation versus tradablepermits Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two methods: Available Methods to Reduce Pollution 1. The government sets pollution standards using regulation. 2. The government allocates tradable pollution permits. Each firm faces different costs, so reducing pollution is more difficult for some firms than others. The following table shows the cost each firm faces to eliminate each unit of pollution. For each firm, assume that the cost of reducing pollution to zero (that is, eliminating all 4 units of pollution) is prohibitively expensive. Firm Cost of Eliminating the... First Unit of Pollution Second Unit…
Suppose there are only two polluting firms, called A and B, with the following marginal abatement costs: 1602AA MACe=− and 100BB MACe=−, where A e represents firm A’s emissions in tons and B e represents firm B’s emissions in tons. Suppose the government wishes to ensure that the two firms together emit 60 tons of the pollutant and uses a Tradable Emission Permit (TEP) policy. Assume that each TEP allows its holder to emit 1 ton, and that the market for permits is perfectly competitive. a. Suppose the government initially distributes the total number of TEPs it issues equally between the two firms. The permits are distributed free of charge. Once trade in permits takes place, what will be the equilibrium in the market for TEPs (i.e. which firm will buy how many TEPs from the other, and at what price)? b. Briefly describe three problems of setting up a TEP market.
Suppose a municipality votes to reduce the combined pollution introduced by three local companies. Presently, each firm creates 4 units of pollution in the area, for a total of 12 pollution units. The government can reduce total pollution in the area to 6 units by choosing between the following two methods: Methods to Reduce Pollution 1. The government imposes pollution standards using regulation. 2. The government issues tradable pollution permits. The costs faced by each firm are different, so it is more difficult for some firms to reduce pollution than others. The following table shows the cost faced by each firm to eliminate each unit of pollution. Assume that the cost of eliminating all 4 units of pollution (that is, reducing pollution to zero) is prohibitively expensive for all three firms. Firm Cost of Eliminating the... First Unit of Pollution Second Unit of Pollution Third Unit of Pollution (Dollars) (Dollars) (Dollars) Firm…
Answer all parts please i have to submit this last question soon please 3. Correcting for negative externalities - Regulation versus tradablepermits Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two methods: Available Methods to Reduce Pollution 1. The government sets pollution standards using regulation. 2. The government allocates tradable pollution permits. Each firm faces different costs, so reducing pollution is more difficult for some firms than others. The following table shows the cost each firm faces to eliminate each unit of pollution. For each firm, assume that the cost of reducing pollution to zero (that is, eliminating all 4 units of pollution) is prohibitively expensive. Firm Cost of…
Figure 8.1 shows the marginal pollution control costs per ton for a firm that would pollute at Qmax without any regulation. Suppose a pollution tax of T1 per ton were implemented, with the firm reducing pollution to Qtax. What area(s) would represent(s) the firm’s pollution reduction costs, not considering the taxes it pays? Group of answer choices A+B A+B+C B+C D C