Effect of effluent fees on the firm input choices, Microeconomics

Assignment Help:

The Effect of Effluent Fees on the Firms' Input Choices

*  Firms which have a by-product to production produce an effluent.

*  An effluent fee is a per unit fee which firms must pay for effluent that they emit.

*  How would producer respond to an effluent fee on the production?

The Scenario: Steel Producer

1) Located on the river: Low cost transportation and emission disposal.

2) EPA imposes a per unit effluent fee to reduce environmentally harmful effluent.

3) How should firm respond to this?

The Cost Minimizing Response to the Effluent Fee

151_effluent fee.png

2372_effluent fee1.png


*  Observations:

- The factors can be substituted more easily; the more effective the fee is in reducing effluent.

Greater the degree of substitutes, less the firm will have to pay (for example $50,000 with the combination B instead of $100,000 with the combination A). 


Related Discussions:- Effect of effluent fees on the firm input choices

Marshalian demand, determination of optimal solution mathematical presentat...

determination of optimal solution mathematical presentation

Change in consumer and producer surplus from price controls, Change in con...

Change in consumer and  producer surplus from price controls * Observations: - The loss is equal to area B + C. - The change in surplus = (A - B) + (-A - C) = -B - C -

Welfare economics, Prove the theory of second best with the help of a diagr...

Prove the theory of second best with the help of a diagram

Utility functions, can you help me answer an economics question

can you help me answer an economics question

What is meant by the circular flow of income, Problem 1: a. Briefly exp...

Problem 1: a. Briefly explain and distinguish between a centrally planned, laissez-faire and mixed economy. b. According to you, which type of economic system is most desira

Rational expectations and economic theory , RATIONAL EXPECTATIONS AND ECONO...

RATIONAL EXPECTATIONS AND ECONOMIC THEORY : We assumed above that the role of economic theory is not to provide quantitative predictions about the future. Suppose we assume ins

Economic growth, Economic Growth: Economic Growth refers to an increas...

Economic Growth: Economic Growth refers to an increase in real aggregate output (real GDP) reflected in increased real per capita income. A country is said to experience econo

Exit strategy, Exit Strategy The exit strategy denotes that which inves...

Exit Strategy The exit strategy denotes that which investors in an organizations realize all or elements of their investment, regardless of the organizations success.

Write Your Message!

Captcha
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