Cost-effectiveness-define potential cost savings

Assignment Help Business Economics
Reference no: EM131112398

Emissions Trading Exercise QuestionsThe following gives each firm’s Marginal Benefits of Emissions from both Exchanges.

Marginal Benefits from Emissions:

Firm 1 MB(E) = 4000---2E

Firm 2 MB(E) = 8000---4E

Firm 3 MB(E) = 10000---5E

Firm 4 MB(E) = 4000---E

Firm 5 MB(E) = 8000---2E

Firm 6 MB(E) = 10000---2.5E

(1) Cost-Effectiveness: Define “potential cost savings” as the maximum possible reduction in abatement costs that can be achieved by allowing firms to trade permits (i.e., relative to the “no-trading” uniform standard of E=1480). What percentage of this cost savings was the class able to achieve in the trading game for both Exchange A and B?

(2) Efficiency: Suppose that the social marginal cost of a unit of emissions were$3,500. Was the permit trading regime we used in class efficient? Would it have been efficient even if it were 100% cost-effective? If not, how many permits should the authority issue in order to achieve efficiency under ideal trading?

(3) Suppose that the external costs of pollution emissions differed across firms. In particular, assume that

SMC1 = $2,200

SMC2 = $2,200

SMC3 = $2,900

SMC4 = $3,600

SMC5 = $4,300

SMC6 = $4,300

Determine whether the permit trading program as it turned out in each Exchange was a good idea or not from a social point of view, relative to the no-trading status quo where every firm got E = 1480. Explain why or why not.

Reference no: EM131112398

Questions Cloud

What is yield management : What is yield management? Why does yield management often result in ticket price increases as one gets closer to the flight date even though the airline runs the risk of some seats going empty?
Firms derived demand functions and profit functions : Suppose firm 1 and firm 2 each produce the same product, and face a market demand curve by Q=5000-200P. Firm 1 and 2 have the same unit cost of production c=10. Write down each firm’s derived demand functions, profit functions and best response funct..
Compute the average total cost per cwt : The Hamilton Flour Company is currently operating its mill six days a week, 24 hours a day on 3 shifts. At current prices, the company could easily obtain a sufficient volume of sales to take the entire output of the seventh day of operation each wee..
What would its optimal quantity and price be : Model of an Airlines Market American Airlines and United Airlines compete for customers on flights between Chicago and Los Angeles. The total number of passengers flown by these two firms (per quarter), q, is the sum of the number of passengers flown..
Cost-effectiveness-define potential cost savings : Cost-Effectiveness: Define “potential cost savings” as the maximum possible reduction in abatement costs that can be achieved by allowing firms to trade permits (i.e., relative to the “no-trading” uniform standard of E=1480). What percentage of this ..
What is the total cost-savings from trading : Find the equilibrium permit price. Hint: The two conditions for a permit price equilibrium will allow you to solve for the emissions levels for each firm after trading. What is the total cost-savings from trading?
Would individual mandates for health insurance : Would individual mandates for health insurance be more burdensome to the poor than employer mandates? Would lower income groups be wise to favor one plan over the other?
Consumers could costlessly contract with private contractors : In a world of perfect information, if consumers could costlessly contract with private contractors to produce a good and there were no economies of scale,
What are switching costs and what do they imply for pricing : What are switching costs and what do they imply for pricing? Discuss three examples from the financial services industry showing how a marketer can take advantage of switching costs.

Reviews

Write a Review

 

Business Economics Questions & Answers

  Monopoly necessarily bad public policy

Give an example of a government created monopoly. Is creating this monopoly necessarily bad public policy?

  Firm labor demand and labor supply equations

A firm’s labor demand and labor supply equations are shown below. The workers, thinking that their wages are too low, decide to strike. After tense negotiations, the firm decides to raise the wage by 20 percent.

  Elucidate relationship between firm contribution margin

Elucidate the relationship between P > AVC and a firm's contribution margin, when a firms is making a decision to shut down operations.

  The equivalent uniform annual cost is most nearly

A company borrows $100,000 today at 12% nominal annual interest. The monthly payment of a 5-year loan is most nearly? A tractor cost $7,500. After 10 years it has a salvage value of $5000. Maintenance costs are $500 per year. If the interest rate is ..

  Demand and supply curves

Given the following demand and supply curves: (a) Qd=-P+10 and (b) Qs=P. calculate the inverse demand function (provide below) and graph the two lines. Calculate and label the Consumer Surplus and Producer Surplus

  Considering the installation of high-tech handling system

A large automobile manufacturing company is considering the installation of a high-tech handling system. Show your cash flow diagram from the company’s perspective. Should the system be recommended for investment? Show all your work and detail your r..

  What is the inflation rate at initial long-run equilibrium

Assume that wages and prices are sticky and that we start at a long-run equilibrium. Assume that at this initial point, the growth rate of the money supply is 4%, the growth rate of the velocity of money is 9% and that the real economic growth rate i..

  The central bank do to keep the peso cost of the dollar

Illustrate what must the central bank do to keep the peso cost of the dollar equal to Peso 3.4425 subsequent the speculators activities.

  Payroll tax

Which of the following is a payroll tax?

  Price discount be compared to the loss from the discount

What discount should be given on products during the upcoming holiday sale? How should you do it? How should the profit generated from the price discount be compared to the loss from the discount?

  Illustrate what is the risk premium on the market

Illustrate what is the risk premium on the market. Illustrate what is the required return on an investment with a beta of 1.5.

  The strategy combination is a nash equilibrium

Suppose that two players are playing the following game. Player A can choose either Top or Bottom, and Player B can choose either Left or Right. The payoffs are given in the following table: where the number on the left is the payoff to Player A, and..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd