The authorities institute an emission charge , Business Economics

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.

1645_22.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: 3/14/2013 3:15:29 AM | Location : United States







Related Discussions:- The authorities institute an emission charge , Assignment Help, Ask Question on The authorities institute an emission charge , Get Answer, Expert's Help, The authorities institute an emission charge Discussions

Write discussion on The authorities institute an emission charge
Your posts are moderated
Related Questions
Explain the elasticity of price expectations?


Consider a market for a good where there is a per unit tax set at t cents per unit sold, where the demand curve slopes downward and where supply is perfectly inelastic. Suppose the

what are the economic problems facing any individual in the economy

What are the limitations of comparative advantage? Limitations of comparative advantage: International trade needs wide specialisation. This can have drawbacks as given b

EXPLAIN WHY INTERDEPENDENCE IN OLIGOPOLY RESULTS IN A TENSION BETWEEN COOPERATION AND COMPETITION.

• Although the country produced several types of commodities (goods and services) in the year 2002, but this country's Central Statistics Office has grouped such commodities into f

QUESTION Evaluate the roles and functions of the Bank of Mauritius in ensuring monetary stability in the economy. Explain Economic growth and its potential benefits to th

Advanced Technology, Inc., (ATI) is evaluating a contract proposal calling for it to build and test bearings using a newly patented surface configuration. ATI would receive $1.4 mi

Problem 1 Discuss how Monetary policy regulates the money supply in an economy through various instruments. A) Explanation of the instruments of monetary policy Problem