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Graph mbe and label intercepts

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Now consider the marginal benefit of emissions associated with methane emissions from natural gas production: MBE = 200 - 8E

(a) Graph MBE and label intercepts. What is the unregulated level of emissions?

(b) Suppose the marginal cost of methane emission is MCE = 20 + 1E. Add this function to the graph and label deadweight loss associated with unregulated emissions.

(c) What is the efficient level of methane emissions?

(d) What is the efficient Pigouvian tax to correct this externality?

(e) If the government sets a cap at E∗ what will the equilibrium price of permits be?

(f) Suppose an individual firm as the marginal benefit function MBEi = 200 - 20Ei . How much will this firm choose to emit under either policy?

Reference no: EM132417155

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