What is the aggregate mac curve for the industry

Assignment Help Microeconomics
Reference no: EM131093208

Environmental Economics Homework 4

1. a. In the introduction the authors state,

The design and implementation of the landmark SO2 cap-and-trade system have led to four striking ironies that are the focus of this essay. First, subsequent research indicates that in enacting an ambitious - and successful - policy to reduce SO2 emissions in order to curb acid rain, the government essentially did the right thing for the wrong reason.

According to the authors, why was the cap-and-trade system the right thing for the wrong reason?

b. There is some evidence that the SO2 allowance program favored scrubbers over low sulfur coal as a way to abate emissions. According to the article, why this favoritism?

c. How did rail deregulation affect the cost of the program?

Q2. Suppose a government agency is considering either a green tax or tradable pollution permits to control a uniformly mixed pollutant. The government does not know the MAC curves of individual firms, but does know the aggregate MAC curve and does know the MPD curve. Can you draw the following conclusions about the effect of the respective pollution control policies? (circle "Yes" or "No" for each statement)

a. Government can generate the efficient amount of emissions reduction using either permits or taxes.

Yes/No

b. Both permits and taxes will generate the result that firms will have the same marginal abatement cost.

Yes/No

c. Both permits and taxes will generate the desired level of total emissions at least cost.

Yes/No

3. The following questions pertain to the graph below.

1653_Figure.png

The graph presents the MAC curves of two types of firms in a polluting industry, the industry-level (aggregate) MAC curve, as well as the MPD curve.

Suppose government chooses to reduce emissions from the original position of E' to E" by allocating tradable pollution permits to the two types of firms. Firms of Type 1 receive E1 permits and Firms of Type 2 receives E2 permits, with E1+E2=E".

a. Is the chosen level of total emissions E" the efficient level?

b. On the graph show the price of a permit with the letter "P".

c. Will Type 1 firms buy permits, sell permits, or do neither?

Q4. Suppose there are two types of firms in an industry. All the firms within each type are the same. The aggregate MAC curve for each type is given below:

MAC1 = 600 - 3E1

MAC2 = 600 - 2E2

a. What is the aggregate MAC curve for the industry?

b. If the MPD curve for the pollutant emitted by the industry is MPD=2.8E, what amount of tradeable permits will generate the efficient amount of emissions?

c. If the MPD curve is the same as in (b), what tax on emissions would generate the efficient amount of emissions?

d. Now suppose that permits are evenly distributed among the firms in the industry. Which of the firm types will be net buyers of permits?

e. What is the total cost of the permit system to firms in the industry?

f. What is the social net benefit of the permit system?

Reference no: EM131093208

Questions Cloud

The inverse demand curve for stackelberg duopoly : The inverse demand curve for a Stackelberg duopoly is P =1847 - 2Q. The leader's cost structure is CL(QL) = 10QL. The follower's cost structure is CF(QF) = 21QF. Find the follower revenue
Groundwater represent an efficient use of resources : In the Great Plains states west of the Mississippi river, annual rainfall is less than annual water usage for irrigation. The level of groundwater in the Ogallala aquifer that underlies the region is dropping precipitously. On its western edges the a..
The change in the firewall performance : Automation the process of unifying the change in the firewall performance
Buying house-analyze the bargaining situation : Imagine you are a public administrator who has just been promoted to a higher position but must relocate to another city and purchase a different home. Using the five distributing bargaining skills, present the steps and various aspects you would con..
What is the aggregate mac curve for the industry : Suppose there are two types of firms in an industry. All the firms within each type are the same. What is the aggregate MAC curve for the industry? If the MPD curve for the pollutant emitted by the industry is MPD=2.8E, what amount of tradeable perm..
Contracts and the statute of frauds : Contracts are the essential part of all real estate transactions and no real estate can be transferred without the use of a written contract to prevent fraudulent practices and to be enforceable in a court of law.
Changing the size of autonomous spending multipliers : Assuming a basic four sector spending model ( Y = C+I+G+X-M) does an increase in exports have the effect of increasing, decreasing, or not changing the size of autonomous spending multipliers (that is, the investment or government spending multiplier..
About the the negotiation process : Discuss the following statements then respond to at least two of your classmates’ postings. Define the Four Stages of the Negotiation Process and discuss what changes have taken place in the negotiation tactics since the 1950s. Explain why the Best A..
Strategy brings into play a mix of economic : Global manufacturing strategy brings into play a mix of economic, competive, legal, political, and environmental conditions.

Reviews

Write a Review

 

Microeconomics Questions & Answers

  How much should she pay to play if the game is fair

In a gambling game a woman is paid $3 if she draws a jack or a queen and $5 if she draws a king or an ace from an ordinary deck of 52 playing cards. If she draws any other card, she loses.

  Find the amount of economic investment which has resulted

assume that a national restaurant firm called bbq builds 10 new restaurants at a cost of 1 million per restaurant. it

  Main outcome of economics

Is the main outcome of economics (high standard of living) the only relevant question in the realm of economic analysis? Do you agree? Is quality of life also significant?

  Consider the following aggregate expenditure model of canad

Consider the following aggregate expenditure model of the Canadian economy operating with givenwages and other factor prices, price level, interest rates, exchange rates, and expectations:

  The price of oranges has risen dramatically

The price of oranges has risen dramatically. Which of the following is likely to happen?

  Which will cause a larger short run increase in prices an

which will cause a larger short run increase in prices an anticipated or unanticipated increase in aggregate demand?

  Maintaining a constant interest rate

Assume that, as the chair of the Fed, you make a decision to "put policy on automatic pilot" and require that monetary policy follow an established rule.

  Is the effect of higher taxes on output smaller or greater

Using the basic IS-LM model in the open economy, analyze the effects of tax increases on the equilibrium output (Y), nominal interest rate (i) and the nominal exchange rate (E). Is the effect of higher taxes on output smaller

  Determine the user cost of capital find the

freds frisbees is trying to determine how many frisbee pressing machines to buy for its new factory. the real price of

  Variable cost arising from the physical inputs marcella

Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella required to operate her business.

  Andrew clark is a mixed-crop producer

Andrew Clark is a mixed-crop producer who has recently diversified into berryproduction. He currently grows berries under contract for a local processor whosells frozen berries. The yield from his small operation is 5000 kilograms per year,and he net..

  Economic costs and benefits for project

Economic costs and benefits for project

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