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Suppose that two firms emit the same chemical pollutant when producing good X. The marginal cost of reducing pollution for each firm is as follows: MAC1 = 30 + 5Z1 and MAC2 = 15 + 20Z2, where Z is the amount of pollution reduction. The marginal socialbenefit (MSB) of total pollution reduction is MSB = 500 - 5ZT, where ZT = Z1 + Z2.
a) How much pollution reduction does each firm should contribute in order to achieve the allocative efficient level of abatement? Show all your work.
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According to the figure, because of the imposition of this per-bag tax, the price buyers now pay and the price sellers get to keep (net) equals: A) $28 and $48, respectively B) $39 and $28, respectively C) $48 and $28, respectively D) $39 and $39, re..
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