Marginal abatement cost curve, Macroeconomics

A critically important criterion that must be considered in evaluating environmental policies is whether they provide strong incentives for people to find new ways to improve ambient environment. Below is a simple model economy of a single pollutant-emitting firm, which has a marginal abatement cost curve (MAC), to discuss the advantages and disadvantages of various policies. MAC1 indicates the current MAC curve and MAC2 and MAC3 refer to the ones realized when the firm spends some resources (money) in an R&D effort to develop better technologies.

 

 

2134_marginal abatement cost curve.png

(a) Suppose that the authorities set an emission standard to reduce emissions from the uncontrolled level of 60 units to 48 units. What are the highest possible R&D investment costs to realize MAC2 and MAC3 respectively?

(b) Suppose, instead, the authorities institute an emission charge and the firm emits 48 units of pollutant with MAC1 under the charge. What are the highest possible R&D investment costs to realize MAC2 and MAC3 respectively?

(c) Suppose, instead, the authorities institute a transferable emission permits program and the firm emits 48 units of pollutant with MAC1 under the program. What are the highest possible R&D investment costs to realize MAC2 and MAC3 respectively?

(d) Some would argue that the incentives for R&D investment under command and control approach are weaker than the answers in part (a). Explain why this is the case by considering the expected behavior of the regulating authorities.

 

Posted Date: 3/5/2013 6:47:08 AM | Location : United States







Related Discussions:- Marginal abatement cost curve, Assignment Help, Ask Question on Marginal abatement cost curve, Get Answer, Expert's Help, Marginal abatement cost curve Discussions

Write discussion on Marginal abatement cost curve
Your posts are moderated
Related Questions
From estimating the aforementioned unrestricted VAR, a table of coefficient and statistics will be produced. From this table, certain statistical information can be analysed, such

1. Kuhn - Tucker Conditions  Max 2x + 3y  s.t. pxX + pyY ≤ M. x ≥ 0, y ≥ 0 2. Max (8 + x)(8 + y)  s.t. pxX + pyY ≤ M. x ≥ 0, y ≥ 0 Utility function 3. U(x, y)

why is imports subtracted from the expenditure approach

Consider two perfectly negatively correlated risky securities A and B. A has an expected rate of return of 12% and a standard deviation of 17%. B has an expected rate of return of

Question 1: Consider a two-period, two-person pure exchange economy. Utility functions and endowments are given as follows. u1(x0; x1) = (x0x1)2 and e1 = (18; 4) u2(x0; x1) = ln x0

Now we will analyse how macroeconomic variables fit together and present models which explain the main macroeconomic variables.  Using these models we can, for instance, analyse

Q. Characteristics of endogenous growth theory? There are many different explanations for technological progress. Most of them, though, have many common characteristics:

A rise in the real wage will bring a decrease in the quantity demanded of labor because of diminishing returns in production. As more and more labor is employed, it is increasingly

Multiple Expansion We have seen that a single bank in a banking system can lend rupee for rupee with its excess reserves. What is the lending ability of the commercial banking

NATIONAL INCOME STATISTICS