Two firms produce a pollutant called Q. The total costs of reducing emissions of Q are as follows for Firm 1 and Firm 2, respectively:
TC1=10+100Q12
TC2=20 + 50Q22.
This means that the marginal costs of reducing emissions of Q are as follows for Firm1 and Firm2, respectively:
MC1=200Q1
MC2=100Q2.
1. Suppose that a regulator has determined that total emissions of Q must be reduced by 20 units. Determine the cost efficient levels of emissions reduction that should be undertaken by Firm1 and Firm2. Remember that the equimarginal principle requires that marginal costs be equated across the two polluters for emissions reduction costs to be minimized. (10).

2.Suppose that, instead of the cost efficient levels of emissions reduction, the regulator orders that emissions be reduced by 10 units for each firm (20 units total). How much more will this allocation of emissions reductions cost, compared to the cost efficient levels? (5).

3.Your correct answer in A is the cost efficient allocation of emissions reduction. What else would you have to know in order to determine whether this is an efficient level of emissions reduction? In answering this question, recall the difference between cost efficiency and maximizing net benefits. (5).

Posted Date: 11/2/2014 3:13:40 PM | Location :

Ask an Expert

Related Discussions:- Need Econ Help, Assignment Help, Ask Question on Need Econ Help, Get Answer, Expert's Help, Need Econ Help Discussions

Write discussion on Need Econ Help
Your posts are moderated

Write your message here..

Related Questions

#title. theory of production, #question meaning .. #question meaning ..

Monopolistic competition, criticisms of monopolistic competition criticisms of monopolistic competition

Enzyme activity mechanism, The enzymes are highly specific in nature. Durin... The enzymes are highly specific in nature. During enzymatic reaction the enzyme is so built that it binds to the substrate in a specific manner. The stepwise mechanism of enzyme ca

Supply theory, what is the theory of supply what is the theory of supply

Capital intensive operations, Where minimum efficient scale is very huge fo... Where minimum efficient scale is very huge for capital intensive operations, it may be more cost effective to allow one company to spread its fixed costs over a very huge number of

Which of the following statements is true?, Nonmetals tend to gain electron... Nonmetals tend to gain electrons. A-Metals tend to lose electrons. B-Atoms have the natural tendency to C-fill their outermost shells. All of the above. D-

What is debt burden, Q. What is Debt Burden? Debt Burden:Real economic ... Q. What is Debt Burden? Debt Burden:Real economic importance of a debt relies on interest rate that should be paid on debt and on total income of consumer or business which und

Externalities, Types of externalities Types of externalities

Production, what is cob duglus production function? what is cob duglus production function?

Price theory, what are the microeconomic encompasses what are the microeconomic encompasses