One is the more rural state capital of albany

Reference no: EM13882745

Hot Spots. Assume there are two power plants regulated by

New York State. One is the more rural state capital of Albany, the other one is in New York City. The abatement cost for SO2 are CA(qA) = 0.5(qA)^2 for the plant in Albany and 2A CB(qB) = (3/2)(qB)^2 for the older plant in New York City, where qA and qB are the abatement 2B quantities in tons (i.e., reduction in SO2 emissions). Currently each plant emits 100 units.

Assume that emissions from the plant in Albany impact 1 million people living around it, and the plant in New York City impacts 7 million people living in New York City. The benefit from pollution abatement is larger in New York where more people are affected by pollution. The benefit from reducing pollution in Albany is given as BA(qA) = 100qA - 0.5(qA)^2 while the benefit from reducing pollution in New York is: BB (qB ) = 700qB - (7/2)(qB)^2 . Note that pollution from the New York City plant does not affect people in Albany and vice versa.

a) Command-and-control

a1)What are total abatement cost CT =CA(qA)+CB(qB) if New York State forces each plant to cut emissions by half (with no possibility to trade permits), i.e. qA = 50 and qB = 50?

a2) What are the total health benefits from the command-and-control regulation?
a3) What are the net benefit from cutting emissions by half under the above command- and-control approach, i.e., benefits minus cost?

b) Tradeable Permits

b1) Now assume that instead of the CAC approach a cap and trade system is introdued. Each firm receives 50 tradeable permits (and thus total abatement is qA+qB =100). How much will each firm abate in the optimum?
b2) What is the permit price p?
b3) What are total abatement cost CT ?
b4) What are the health benefits from this regulation?
b5) What are net benefits to society from this policy?

c) Comparison of policy options

c1) Are the net benefits higher under the command-and-control regulation a3) or under the one that allows trading b5)? Explain why!
c2) What is the optimal abatement policy, i.e., the one that maximizes net benefits to society? State how much each plant should abate.
c3) Discuss the implication of the optimal economic outcome on pollution damages of citizens in both Albany and New York.

Reference no: EM13882745

Questions Cloud

What is the maximum sustainable growth rate : what is the maximum sustainable growth rate (SGR)?

Significant number of better business bureau complaints : Explain how the following situations can shed light on the question, What is the character of the borrower and quality of information provided? Significant number of Better Business Bureau complaints. The business is a family business and several mem..

Develop a level two map to detail the control points : Develop a Level 2 map to detail the control points of the selected control area, and then develop Level 3 maps to identify control elements (input, output, process, and failure modes) of key control points.

What is a merger : What is a merger? Why would the government want to block a merger? Give examples of a couple of mergers. one that went through and one that was block? Discuss why that merger was block. Should mergers be scrutinized? Why or why not.

One is the more rural state capital of albany : New York State. One is the more rural state capital of Albany, the other one is in New York City. The abatement cost for SO2 are CA(qA) = 0.5(qA)^2 for the plant in Albany and 2A CB(qB) = (3/2)(qB)^2 for the older plant in New York City, where qA an..

When taking a physical inventory count at a typical : When taking a physical inventory count at a typical manufacturing facility, which category of inventory (raw materials, work in process, or finished goods) is likely to be the most time consuming to count and determine the relevant costs? Why?

Describe the challenges faced by us customs : Based on the assigned readings, your responses are to be in your own words with no copying except for minimal quotes that must be properly cited. What I am looking for here are your own thoughts and opinions that demonstrate your understanding of the..

Strength or weakness in the underlying firms performance : Standard ratio analysis distinguishes between four categories of ratios. Describe how ratios in each category indicate strength or weakness in the underlying firm's performance.

Evaluate the level of motivation : Determining which characteristics are important for performance.Measuring the performances What is the applicant's ability and motivation required.Evaluate the level of motivation.Who will be involved in selection / hiring.

User Account

All Pages