Consider the following information: Firm A: MC₂ = 4/3ea Firm B: MCb = 4eb Under the current command and control approach, both firms can pollute 55 units of emissions. If the regulator wants to introduce an ETS to reduce emissions by 30 units. Determine the following. a) Firm A will abate units. b) Firm B will abate c) The price of the permits would be $ d) If all permits were given to Firm B, Firm B would choose to a total amount of $ units. (buy/sell) permits for

Consider the following information: Firm A: MC₂ = 4/3ea Firm B: MCb = 4eb Under the current command and control approach, both firms can pollute 55 units of emissions. If the regulator wants to introduce an ETS to reduce emissions by 30 units. Determine the following. a) Firm A will abate units. b) Firm B will abate c) The price of the permits would be $ d) If all permits were given to Firm B, Firm B would choose to a total amount of $ units. (buy/sell) permits for

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter14: Environmental Economics

Section: Chapter Questions

Problem 17SQ

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suppose the regulator imposes a Pigouvian tax on each unit of emissions. Calculate each firm's emissions level and the total tax collected.
The table below gives the marginal abatement costs of three polluting firms in an industry. The industry is regulated with an emission tax of $6. Marginal abatements costs ($/ton) Emissions (tons/week) 10 Firm 1 Firm 2 Firm 3 0 0 2 3 4 2 12 3 18 4. 5 10 24 4 12 36 6. 3 14 60 18 72 8. 23 84 29 108 10 a. What level of emissions does each firm choose? Explain how they respond to the emissions tax. b. What are cach firm's total compliance costs? Show your work. c. What is the total level of abatement? Discuss whether this abatement is achieved at the least cost for society.
Assume the firm has historical emissions of 10 units of carbon and the government regulator gives the firm 7 permits to pollute. Each permit allows 1 unit of pollution.
Consider two polluting firms with the following marginal savings functions; MS1 = 20 - e1 for firm 1 MS2 = 40 – 0.5e2 for firm 2 Where e1 and e2 are emission levels for firm 1 and 2, respectively. A. Sketch the MS functions on a diagram. B. Derive the total MS function. Draw it on your diagram above. C. The regulator would like to reduce the level of total emissions by 60% from their unregulated level. What is the total reduction in emissions needed? i. If the regulator decides emissions be cut using equiproportionate reduction, how much is each firm required to reduce? Explain whether this would be a cost-effective way to reduce emissions? ii. If instead the regulator decides to use an emission fee, what level should the fee be set to achieve the desired level of emissions? How much would each firm emit? Illustrate your answer on the diagram above. iii. In (ii) above, do the firms emit different amounts in the presence of the emission fee? Does it make sense that they should…
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.
QUESTION 9 A toy factory Avengers can generate 50 (CO2) emissions without any regulation. The marginal control cost for Ávengers, associated with emission reduction, is known MC=10+Q where Q is reduced units. Suppose that the regulator impose an emission standard on Avengers: According to the emission standard, the factory is allowed to emit 20 units. Avengers will clean up units of pollutant under the emission standard. The total control cost for Avengers in this command-and-control regulation is . Hint: Type integers.
Suppose there are only two polluting firms, called A and B, with the following marginal abatement costs: MACA=160 2- e and MACB=100-es, where e represents firm A's emissions in tons and ea 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.
Complete the second column of the following table by indicating who buys and sells permits in this case. Complete the fourth column of the table with the number of permits each firm ends up with after trading with the others. Next, subtract the number of permits from the initial pollution level to determine how many units of pollution reduction each firm has to complete, and enter these values into the fifth column of the table. Next, determine the total cost of reducing the pollution levels you determined in the previous column, and enter that into the final column of the table. Finally, add up the total pollution reduction costs for each firm and enter the total amount in the final cell of the total row in the following table. Firm A B C Total Buys or Sells Initial Pollution Level 30 45 60 If permits could not be traded, firm A would have to remove units of pollution at a total cost of $ The overall cost of reducing pollution in this case is $ " Permits after Trade Remaining…
QUESTION 10 A toy factory Avengers can generate 50 (CO2) emissions without any regulation. The marginal control cost for Ávengers, associated with emission reduction, is known MC=10+Q where Q is reduced units. Suppose that the regulator impose an emission standard on Avengers: According to the emission standard, the factory is allowed to emit 20 units. The level of reduction in the emission standard could be accomplished through an emission charge (quantity tax or penalty fee on emission). An emission charge of per emission unit would generate the target amount of reduction. Total (tax) revenue the regulator will collect as emission charges would be . Hint: Type integers.
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 tax paid by the firm? Group of answer choices A B+C A+B A+B+C B
C Consider two polluting firms with the following marginal savings functions; MS, = 20 - e, for firm 1 MS2 = 40 – 2e, for firm 2 Where e and ez are emission levels for firm 1 and 2, respectively. a. Sketch the MS functions on a diagram. b. Derive the total MS function. Draw it on your diagram above. c. The regulator would like to reduce the level of total emissions by 60% from their unregulated level. What is the total reduction in emissions needed? i. If the regulator decides emissions be cut using equiproportionate reduction, how much is each firm required to reduce? Explain whether this would be a cost-effective way to reduce emissions?
2. Company A, the polluter, is located upwind of Company B, the victim, in a certain airshed. A's factory pollutes the air, thereby harming B's operations. A's marginal abatement cost is MAC(E) = 30 – E/3, where E is the amount of emissions. B's marginal pollution damages from emissions are MPD(E) = (2/3) -E. Suppose victim B has the right to perfectly clean air. What will be the observed level of emissions from polluter A, in the absence of bargaining? If the transactions costs of bargaining are zero, how much pollution will A emit after bargaining? What will be the minimum amount that B must be paid to agree to accept an emissions at this level?