Suppose that the Marginal Abatement Cost function and the Marginal Damage function for an industry are given as follows: MAC = 80 -0.2e MD=0.3e For simplicity here, we are assuming that they are linear. a. Graph the MAC and MD curves for this industry. Make sure you are marking out any and all relevant axis intercepts. b. Suppose that the industry is completely unregulated. What is the uncontrolled level of emissions? c. Calculate the actual dollar amount of the total damages incurred to society at the uncontrolled level of emissions. How did you find your answer? d. Suppose that the government implements strong liability laws hold polluters financially accountable for any damages that they cause society as a policy. If these laws are sufficiently rigorous and the court system perfectly upholds them, what should be expected to be the level of pollution in the industry? Explain your reasoning.

Suppose that the Marginal Abatement Cost function and the Marginal Damage function for an industry are given as follows: MAC = 80 -0.2e MD=0.3e For simplicity here, we are assuming that they are linear. a. Graph the MAC and MD curves for this industry. Make sure you are marking out any and all relevant axis intercepts. b. Suppose that the industry is completely unregulated. What is the uncontrolled level of emissions? c. Calculate the actual dollar amount of the total damages incurred to society at the uncontrolled level of emissions. How did you find your answer? d. Suppose that the government implements strong liability laws hold polluters financially accountable for any damages that they cause society as a policy. If these laws are sufficiently rigorous and the court system perfectly upholds them, what should be expected to be the level of pollution in the industry? Explain your reasoning.

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

Chapter10: Prices, Output, And Strategy: Pure And Monopolistic Competition

Section: Chapter Questions

Problem 3E

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