Socially optimal level of methane reduction

Question

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Answer 1

Question

Chapter 16, Problem 16.6P

a

To determine

Socially optimal level of methane reduction

a

Expert Solution

Answer to Problem 16.6P

Socially optimal level of R is 40.

Explanation of Solution

Given:

MC=20+R

MB=100−R

Marginal benefit (MB) from cow induced methane is given below:

MB=100−R

Percentage reduction is represented by R

Marginal cost (MC) to farmers of methane reduction is as follows:

MC=20+R

Socially optimal level of methane is established by equating the social marginal benefit (MB) with marginal cost (MC) :

MB=MC100−R=20R 2R=80 R=802 =40

Socially optimal level of R is 40.

Economics Concept Introduction

Introduction:

Social optimal level is attained when Marginal benefit is equal to Marginal cost.

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

b)

To determine

Fee paid by farmers and optimal level

b)

Expert Solution

Answer to Problem 16.6P

Fee should be $60 to achieve the optimal level of methane

Explanation of Solution

Given:

MC=20+R

MB=100−R

Fee to be decided by the interaction of marginal benefit and marginal cost to society, optimal level of methane is 40 that equate the social marginal benefit and marginal cost abatement. Fee can be calculated by substituting the value of optimal level of methane either in social marginal benefit or marginal cost

MR=100−R =100−40 =60

Fee should be $60 to achieve the optimal level of methane

Economics Concept Introduction

Introduction:

Social optimal level is attained when Marginal benefit is equal to Marginal cost.

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

c)

To determine

Reduction in methane cost and quantity

c)

Expert Solution

Answer to Problem 16.6P

Reduction in methane quantity is 26.22

Explanation of Solution

Given:

MC1 = 20+23R1MC2 = 20+2R2

MB=100−R

Marginal benefit (MB)

MB=100−RR=(R1+R2)

Following is the condition for equilibrium:

MB=MC1=MC2100−(R1+R2)=20+23R1100−R1−R2=20+23R1240=3R2+5R15R1+3R2=240.........(1)

100−(R1+R2)=20+2R2100−R1−R2=20+2R280=3R2+R1R1+3R2=80........(2)

Solve equations (1) and (2):

5R1+3R2=2405R1+15R2=40012R2=160 R2=16012 =13.33

Substitute the value of R2 in equation (1):

5R1+3R2=2405R1+3(13.33)=2405R1+39.99=240R1=40.002

Total reduction is average two farms:

= ( 40.002+13.332)26.66

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

d)

To determine

Adoption of methane fee

d)

Expert Solution

Answer to Problem 16.6P

The overall reduction of methane is 80 (60+20) . The overall reduction is 80 and fee is also 40; hence, the total cost is $3,200 . Total reduction would be 40 if the average of two is taken. Thus, cost would be $1,600.

Explanation of Solution

Given:

MC1 = 20+23R1MC2 = 20+2R2

MB=100−R

Equate the value of fee with marginal cost functions both farms:

20+(23)R1=6060+2R1=180 R1=1202 =60

20+2R2=60 R2=402 =20

The overall reduction of methane is 80 (60+20) . The overall reduction is 80 and fee is also 40; hence, the total cost is $3,200 . Total reduction would be 40 if the average of two is taken. Thus, cost would be $1,600.

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

e)

To determine

Difference in result part C and D

e)

Expert Solution

Explanation of Solution

Both parts C and D yield different results. In the part C, the average of both farms is taken as the total reduction of methane. In part D, average of both farm is taken individually.

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

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Students have asked these similar questions

A government study has concluded that the marginal benefits from controlling cow-induced methane production are given by MB = 100 – R where R represents the percentage reduction from unregulated levels. The marginal cost to farmers of methane reduction (through better cow feed) is given by MC = 20 + R a) What is the socially optimal level of methane reduction? [Hint: Let MB=MC] b) If the government were to adopt a methane fee that farmers must pay for each percent of methane they do not reduce, how should this fee be set to achieve the optimal level of R? {Hint: This fee will be reflected in the MC to the firm] c) Suppose there are two farmers in this market with differing costs of methane reduction. The first has marginal costs given by MC1 = 20 + 2/3 R1 whereas the second has marginal costs given by MC2 = 20 +2R2 Total methane reduction is the average from these two farms. If the government mandates that each farm reduce methane by the optimal percentage calculated in part a), what…

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Answer 2

Question

Chapter 16, Problem 16.6P

a

To determine

Socially optimal level of methane reduction

a

Expert Solution

Answer to Problem 16.6P

Socially optimal level of R is 40.

Explanation of Solution

Given:

MC=20+R

MB=100−R

Marginal benefit (MB) from cow induced methane is given below:

MB=100−R

Percentage reduction is represented by R

Marginal cost (MC) to farmers of methane reduction is as follows:

MC=20+R

Socially optimal level of methane is established by equating the social marginal benefit (MB) with marginal cost (MC) :

MB=MC100−R=20R 2R=80 R=802 =40

Socially optimal level of R is 40.

Economics Concept Introduction

Introduction:

Social optimal level is attained when Marginal benefit is equal to Marginal cost.

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

b)

To determine

Fee paid by farmers and optimal level

b)

Expert Solution

Answer to Problem 16.6P

Fee should be $60 to achieve the optimal level of methane

Explanation of Solution

Given:

MC=20+R

MB=100−R

Fee to be decided by the interaction of marginal benefit and marginal cost to society, optimal level of methane is 40 that equate the social marginal benefit and marginal cost abatement. Fee can be calculated by substituting the value of optimal level of methane either in social marginal benefit or marginal cost

MR=100−R =100−40 =60

Fee should be $60 to achieve the optimal level of methane

Economics Concept Introduction

Introduction:

Social optimal level is attained when Marginal benefit is equal to Marginal cost.

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

c)

To determine

Reduction in methane cost and quantity

c)

Expert Solution

Answer to Problem 16.6P

Reduction in methane quantity is 26.22

Explanation of Solution

Given:

MC1 = 20+23R1MC2 = 20+2R2

MB=100−R

Marginal benefit (MB)

MB=100−RR=(R1+R2)

Following is the condition for equilibrium:

MB=MC1=MC2100−(R1+R2)=20+23R1100−R1−R2=20+23R1240=3R2+5R15R1+3R2=240.........(1)

100−(R1+R2)=20+2R2100−R1−R2=20+2R280=3R2+R1R1+3R2=80........(2)

Solve equations (1) and (2):

5R1+3R2=2405R1+15R2=40012R2=160 R2=16012 =13.33

Substitute the value of R2 in equation (1):

5R1+3R2=2405R1+3(13.33)=2405R1+39.99=240R1=40.002

Total reduction is average two farms:

= ( 40.002+13.332)26.66

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

d)

To determine

Adoption of methane fee

d)

Expert Solution

Answer to Problem 16.6P

The overall reduction of methane is 80 (60+20) . The overall reduction is 80 and fee is also 40; hence, the total cost is $3,200 . Total reduction would be 40 if the average of two is taken. Thus, cost would be $1,600.

Explanation of Solution

Given:

MC1 = 20+23R1MC2 = 20+2R2

MB=100−R

Equate the value of fee with marginal cost functions both farms:

20+(23)R1=6060+2R1=180 R1=1202 =60

20+2R2=60 R2=402 =20

The overall reduction of methane is 80 (60+20) . The overall reduction is 80 and fee is also 40; hence, the total cost is $3,200 . Total reduction would be 40 if the average of two is taken. Thus, cost would be $1,600.

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

e)

To determine

Difference in result part C and D

e)

Expert Solution

Explanation of Solution

Both parts C and D yield different results. In the part C, the average of both farms is taken as the total reduction of methane. In part D, average of both farm is taken individually.

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 16, Problem 16.6P

a

To determine

Socially optimal level of methane reduction

a

Expert Solution

Answer to Problem 16.6P

Socially optimal level of R is 40.

Explanation of Solution

Given:

MC=20+R

MB=100−R

Marginal benefit (MB) from cow induced methane is given below:

MB=100−R

Percentage reduction is represented by R

Marginal cost (MC) to farmers of methane reduction is as follows:

MC=20+R

Socially optimal level of methane is established by equating the social marginal benefit (MB) with marginal cost (MC) :

MB=MC100−R=20R 2R=80 R=802 =40

Socially optimal level of R is 40.

Economics Concept Introduction

Introduction:

Social optimal level is attained when Marginal benefit is equal to Marginal cost.

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

b)

To determine

Fee paid by farmers and optimal level

b)

Expert Solution

Answer to Problem 16.6P

Fee should be $60 to achieve the optimal level of methane

Explanation of Solution

Given:

MC=20+R

MB=100−R

Fee to be decided by the interaction of marginal benefit and marginal cost to society, optimal level of methane is 40 that equate the social marginal benefit and marginal cost abatement. Fee can be calculated by substituting the value of optimal level of methane either in social marginal benefit or marginal cost

MR=100−R =100−40 =60

Fee should be $60 to achieve the optimal level of methane

Economics Concept Introduction

Introduction:

Social optimal level is attained when Marginal benefit is equal to Marginal cost.

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

c)

To determine

Reduction in methane cost and quantity

c)

Expert Solution

Answer to Problem 16.6P

Reduction in methane quantity is 26.22

Explanation of Solution

Given:

MC1 = 20+23R1MC2 = 20+2R2

MB=100−R

Marginal benefit (MB)

MB=100−RR=(R1+R2)

Following is the condition for equilibrium:

MB=MC1=MC2100−(R1+R2)=20+23R1100−R1−R2=20+23R1240=3R2+5R15R1+3R2=240.........(1)

100−(R1+R2)=20+2R2100−R1−R2=20+2R280=3R2+R1R1+3R2=80........(2)

Solve equations (1) and (2):

5R1+3R2=2405R1+15R2=40012R2=160 R2=16012 =13.33

Substitute the value of R2 in equation (1):

5R1+3R2=2405R1+3(13.33)=2405R1+39.99=240R1=40.002

Total reduction is average two farms:

= ( 40.002+13.332)26.66

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

d)

To determine

Adoption of methane fee

d)

Expert Solution

Answer to Problem 16.6P

The overall reduction of methane is 80 (60+20) . The overall reduction is 80 and fee is also 40; hence, the total cost is $3,200 . Total reduction would be 40 if the average of two is taken. Thus, cost would be $1,600.

Explanation of Solution

Given:

MC1 = 20+23R1MC2 = 20+2R2

MB=100−R

Equate the value of fee with marginal cost functions both farms:

20+(23)R1=6060+2R1=180 R1=1202 =60

20+2R2=60 R2=402 =20

The overall reduction of methane is 80 (60+20) . The overall reduction is 80 and fee is also 40; hence, the total cost is $3,200 . Total reduction would be 40 if the average of two is taken. Thus, cost would be $1,600.

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

e)

To determine

Difference in result part C and D

e)

Expert Solution

Explanation of Solution

Both parts C and D yield different results. In the part C, the average of both farms is taken as the total reduction of methane. In part D, average of both farm is taken individually.

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 16, Problem 16.6P

a

To determine

Socially optimal level of methane reduction

a

Expert Solution

Answer to Problem 16.6P

Socially optimal level of R is 40.

Explanation of Solution

Given:

MC=20+R

MB=100−R

Marginal benefit (MB) from cow induced methane is given below:

MB=100−R

Percentage reduction is represented by R

Marginal cost (MC) to farmers of methane reduction is as follows:

MC=20+R

Socially optimal level of methane is established by equating the social marginal benefit (MB) with marginal cost (MC) :

MB=MC100−R=20R 2R=80 R=802 =40

Socially optimal level of R is 40.

Economics Concept Introduction

Introduction:

Social optimal level is attained when Marginal benefit is equal to Marginal cost.

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

b)

To determine

Fee paid by farmers and optimal level

b)

Expert Solution

Answer to Problem 16.6P

Fee should be $60 to achieve the optimal level of methane

Explanation of Solution

Given:

MC=20+R

MB=100−R

Fee to be decided by the interaction of marginal benefit and marginal cost to society, optimal level of methane is 40 that equate the social marginal benefit and marginal cost abatement. Fee can be calculated by substituting the value of optimal level of methane either in social marginal benefit or marginal cost

MR=100−R =100−40 =60

Fee should be $60 to achieve the optimal level of methane

Economics Concept Introduction

Introduction:

Social optimal level is attained when Marginal benefit is equal to Marginal cost.

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

c)

To determine

Reduction in methane cost and quantity

c)

Expert Solution

Answer to Problem 16.6P

Reduction in methane quantity is 26.22

Explanation of Solution

Given:

MC1 = 20+23R1MC2 = 20+2R2

MB=100−R

Marginal benefit (MB)

MB=100−RR=(R1+R2)

Following is the condition for equilibrium:

MB=MC1=MC2100−(R1+R2)=20+23R1100−R1−R2=20+23R1240=3R2+5R15R1+3R2=240.........(1)

100−(R1+R2)=20+2R2100−R1−R2=20+2R280=3R2+R1R1+3R2=80........(2)

Solve equations (1) and (2):

5R1+3R2=2405R1+15R2=40012R2=160 R2=16012 =13.33

Substitute the value of R2 in equation (1):

5R1+3R2=2405R1+3(13.33)=2405R1+39.99=240R1=40.002

Total reduction is average two farms:

= ( 40.002+13.332)26.66

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

d)

To determine

Adoption of methane fee

d)

Expert Solution

Answer to Problem 16.6P

The overall reduction of methane is 80 (60+20) . The overall reduction is 80 and fee is also 40; hence, the total cost is $3,200 . Total reduction would be 40 if the average of two is taken. Thus, cost would be $1,600.

Explanation of Solution

Given:

MC1 = 20+23R1MC2 = 20+2R2

MB=100−R

Equate the value of fee with marginal cost functions both farms:

20+(23)R1=6060+2R1=180 R1=1202 =60

20+2R2=60 R2=402 =20

The overall reduction of methane is 80 (60+20) . The overall reduction is 80 and fee is also 40; hence, the total cost is $3,200 . Total reduction would be 40 if the average of two is taken. Thus, cost would be $1,600.

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

e)

To determine

Difference in result part C and D

e)

Expert Solution

Explanation of Solution

Both parts C and D yield different results. In the part C, the average of both farms is taken as the total reduction of methane. In part D, average of both farm is taken individually.

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 16, Problem 16.6P

a

To determine

Socially optimal level of methane reduction

a

Expert Solution

Answer to Problem 16.6P

Socially optimal level of R is 40.

Explanation of Solution

Given:

MC=20+R

MB=100−R

Marginal benefit (MB) from cow induced methane is given below:

MB=100−R

Percentage reduction is represented by R

Marginal cost (MC) to farmers of methane reduction is as follows:

MC=20+R

Socially optimal level of methane is established by equating the social marginal benefit (MB) with marginal cost (MC) :

MB=MC100−R=20R 2R=80 R=802 =40

Socially optimal level of R is 40.

Economics Concept Introduction

Introduction:

Social optimal level is attained when Marginal benefit is equal to Marginal cost.

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

b)

To determine

Fee paid by farmers and optimal level

b)

Expert Solution

Answer to Problem 16.6P

Fee should be $60 to achieve the optimal level of methane

Explanation of Solution

Given:

MC=20+R

MB=100−R

Fee to be decided by the interaction of marginal benefit and marginal cost to society, optimal level of methane is 40 that equate the social marginal benefit and marginal cost abatement. Fee can be calculated by substituting the value of optimal level of methane either in social marginal benefit or marginal cost

MR=100−R =100−40 =60

Fee should be $60 to achieve the optimal level of methane

Economics Concept Introduction

Introduction:

Social optimal level is attained when Marginal benefit is equal to Marginal cost.

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

c)

To determine

Reduction in methane cost and quantity

c)

Expert Solution

Answer to Problem 16.6P

Reduction in methane quantity is 26.22

Explanation of Solution

Given:

MC1 = 20+23R1MC2 = 20+2R2

MB=100−R

Marginal benefit (MB)

MB=100−RR=(R1+R2)

Following is the condition for equilibrium:

MB=MC1=MC2100−(R1+R2)=20+23R1100−R1−R2=20+23R1240=3R2+5R15R1+3R2=240.........(1)

100−(R1+R2)=20+2R2100−R1−R2=20+2R280=3R2+R1R1+3R2=80........(2)

Solve equations (1) and (2):

5R1+3R2=2405R1+15R2=40012R2=160 R2=16012 =13.33

Substitute the value of R2 in equation (1):

5R1+3R2=2405R1+3(13.33)=2405R1+39.99=240R1=40.002

Total reduction is average two farms:

= ( 40.002+13.332)26.66

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

d)

To determine

Adoption of methane fee

d)

Expert Solution

Answer to Problem 16.6P

The overall reduction of methane is 80 (60+20) . The overall reduction is 80 and fee is also 40; hence, the total cost is $3,200 . Total reduction would be 40 if the average of two is taken. Thus, cost would be $1,600.

Explanation of Solution

Given:

MC1 = 20+23R1MC2 = 20+2R2

MB=100−R

Equate the value of fee with marginal cost functions both farms:

20+(23)R1=6060+2R1=180 R1=1202 =60

20+2R2=60 R2=402 =20

The overall reduction of methane is 80 (60+20) . The overall reduction is 80 and fee is also 40; hence, the total cost is $3,200 . Total reduction would be 40 if the average of two is taken. Thus, cost would be $1,600.

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

e)

To determine

Difference in result part C and D

e)

Expert Solution

Explanation of Solution

Both parts C and D yield different results. In the part C, the average of both farms is taken as the total reduction of methane. In part D, average of both farm is taken individually.

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

Answer 6

Chapter 16, Problem 16.6P

a

To determine

Socially optimal level of methane reduction

a

Expert Solution

Answer to Problem 16.6P

Socially optimal level of R is 40.

Explanation of Solution

Given:

MC=20+R

MB=100−R

Marginal benefit (MB) from cow induced methane is given below:

MB=100−R

Percentage reduction is represented by R

Marginal cost (MC) to farmers of methane reduction is as follows:

MC=20+R

Socially optimal level of methane is established by equating the social marginal benefit (MB) with marginal cost (MC) :

MB=MC100−R=20R 2R=80 R=802 =40

Socially optimal level of R is 40.

Economics Concept Introduction

Introduction:

Social optimal level is attained when Marginal benefit is equal to Marginal cost.

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

Answer 7

Chapter 16, Problem 16.6P

a

To determine

Socially optimal level of methane reduction

Answer 8

a

Expert Solution

Answer to Problem 16.6P

Socially optimal level of R is 40.

Answer 9

a

Expert Solution

Answer 10

a

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Given:

MC=20+R

MB=100−R

Marginal benefit (MB) from cow induced methane is given below:

MB=100−R

Percentage reduction is represented by R

Marginal cost (MC) to farmers of methane reduction is as follows:

MC=20+R

Socially optimal level of methane is established by equating the social marginal benefit (MB) with marginal cost (MC) :

MB=MC100−R=20R 2R=80 R=802 =40

Socially optimal level of R is 40.

Answer 13

Economics Concept Introduction

Introduction:

Social optimal level is attained when Marginal benefit is equal to Marginal cost.

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

Answer 14

b)

To determine

Fee paid by farmers and optimal level

b)

Expert Solution

Answer to Problem 16.6P

Fee should be $60 to achieve the optimal level of methane

Explanation of Solution

Given:

MC=20+R

MB=100−R

Fee to be decided by the interaction of marginal benefit and marginal cost to society, optimal level of methane is 40 that equate the social marginal benefit and marginal cost abatement. Fee can be calculated by substituting the value of optimal level of methane either in social marginal benefit or marginal cost

MR=100−R =100−40 =60

Fee should be $60 to achieve the optimal level of methane

Economics Concept Introduction

Introduction:

Social optimal level is attained when Marginal benefit is equal to Marginal cost.

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

Answer 15

b)

To determine

Fee paid by farmers and optimal level

Answer 16

b)

Expert Solution

Answer to Problem 16.6P

Fee should be $60 to achieve the optimal level of methane

Answer 17

b)

Expert Solution

Answer 18

b)

Expert Solution

Answer 19

Expert Solution

Answer 20

Explanation of Solution

Given:

MC=20+R

MB=100−R

Fee to be decided by the interaction of marginal benefit and marginal cost to society, optimal level of methane is 40 that equate the social marginal benefit and marginal cost abatement. Fee can be calculated by substituting the value of optimal level of methane either in social marginal benefit or marginal cost

MR=100−R =100−40 =60

Fee should be $60 to achieve the optimal level of methane

Answer 21

Economics Concept Introduction

Introduction:

Social optimal level is attained when Marginal benefit is equal to Marginal cost.

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

Answer 22

c)

To determine

Reduction in methane cost and quantity

c)

Expert Solution

Answer to Problem 16.6P

Reduction in methane quantity is 26.22

Explanation of Solution

Given:

MC1 = 20+23R1MC2 = 20+2R2

MB=100−R

Marginal benefit (MB)

MB=100−RR=(R1+R2)

Following is the condition for equilibrium:

MB=MC1=MC2100−(R1+R2)=20+23R1100−R1−R2=20+23R1240=3R2+5R15R1+3R2=240.........(1)

100−(R1+R2)=20+2R2100−R1−R2=20+2R280=3R2+R1R1+3R2=80........(2)

Solve equations (1) and (2):

5R1+3R2=2405R1+15R2=40012R2=160 R2=16012 =13.33

Substitute the value of R2 in equation (1):

5R1+3R2=2405R1+3(13.33)=2405R1+39.99=240R1=40.002

Total reduction is average two farms:

= ( 40.002+13.332)26.66

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

Answer 23

c)

To determine

Reduction in methane cost and quantity

Answer 24

c)

Expert Solution

Answer to Problem 16.6P

Reduction in methane quantity is 26.22

Answer 25

c)

Expert Solution

Answer 26

c)

Expert Solution

Answer 27

Expert Solution

Answer 28

Explanation of Solution

Given:

MC1 = 20+23R1MC2 = 20+2R2

MB=100−R

Marginal benefit (MB)

MB=100−RR=(R1+R2)

Following is the condition for equilibrium:

MB=MC1=MC2100−(R1+R2)=20+23R1100−R1−R2=20+23R1240=3R2+5R15R1+3R2=240.........(1)

100−(R1+R2)=20+2R2100−R1−R2=20+2R280=3R2+R1R1+3R2=80........(2)

Solve equations (1) and (2):

5R1+3R2=2405R1+15R2=40012R2=160 R2=16012 =13.33

Substitute the value of R2 in equation (1):

5R1+3R2=2405R1+3(13.33)=2405R1+39.99=240R1=40.002

Total reduction is average two farms:

= ( 40.002+13.332)26.66

Answer 29

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

Answer 30

d)

To determine

Adoption of methane fee

d)

Expert Solution

Answer to Problem 16.6P

The overall reduction of methane is 80 (60+20) . The overall reduction is 80 and fee is also 40; hence, the total cost is $3,200 . Total reduction would be 40 if the average of two is taken. Thus, cost would be $1,600.

Explanation of Solution

Given:

MC1 = 20+23R1MC2 = 20+2R2

MB=100−R

Equate the value of fee with marginal cost functions both farms:

20+(23)R1=6060+2R1=180 R1=1202 =60

20+2R2=60 R2=402 =20

The overall reduction of methane is 80 (60+20) . The overall reduction is 80 and fee is also 40; hence, the total cost is $3,200 . Total reduction would be 40 if the average of two is taken. Thus, cost would be $1,600.

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

Answer 31

d)

To determine

Adoption of methane fee

Answer 32

d)

Expert Solution

Answer to Problem 16.6P

The overall reduction of methane is 80 (60+20) . The overall reduction is 80 and fee is also 40; hence, the total cost is $3,200 . Total reduction would be 40 if the average of two is taken. Thus, cost would be $1,600.

Answer 33

d)

Expert Solution

Answer 34

d)

Expert Solution

Answer 35

Expert Solution

Answer 36

Explanation of Solution

Given:

MC1 = 20+23R1MC2 = 20+2R2

MB=100−R

Equate the value of fee with marginal cost functions both farms:

20+(23)R1=6060+2R1=180 R1=1202 =60

20+2R2=60 R2=402 =20

The overall reduction of methane is 80 (60+20) . The overall reduction is 80 and fee is also 40; hence, the total cost is $3,200 . Total reduction would be 40 if the average of two is taken. Thus, cost would be $1,600.

Answer 37

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

Answer 38

e)

To determine

Difference in result part C and D

e)

Expert Solution

Explanation of Solution

Both parts C and D yield different results. In the part C, the average of both farms is taken as the total reduction of methane. In part D, average of both farm is taken individually.

Economics Concept Introduction

Introduction:

Marginal benefit is the additional benefit derived when one more unit is consumed.

Marginal cost is the addition to total cost when one more unit of output is produced.

Answer 39

e)

To determine

Difference in result part C and D

Answer 40

e)

Expert Solution

Explanation of Solution

Both parts C and D yield different results. In the part C, the average of both farms is taken as the total reduction of methane. In part D, average of both farm is taken individually.