Marginal costs of abatement for the first source

Reference no: EM13551545

1. Two pollution sources are located in the same town, immediately next to each other. For every quantity of abatement, marginal costs of abatement for the first source are higher than marginal costs of abatement for the second source.

(a) If both the tax and standard achieve the same level of total emissions, is a uniform pollution tax more cost effective than a uniform pollution standard (that is, a tax or a standard that is the same for both sources), less cost effective than a uniform standard, or are you unable to tell? Why?

(b) Would the sources prefer to face a pollution subsidy or a marketable permit scheme, if permits are distributed at no cost based on the standard in (a), and both the subsidy and the permit scheme achieve the same level of total emissions? Why?

2. In the figure below, MB1 is the marginal benefit that town 1 gets from abatement; MB2 is the marginal benefit for town 2. MC, A is the marginal cost of abatement for source A, and MC, B is the marginal cost of abatement to source B. In both cases, the pollution is local, that is it affects only the city in which the source is located. Use the figure below to answer the following questions.

354_Marginal benefit.png

(a) If source A is located in town 1, what is the efficient level of abatement for town 1? Why?

(b) If source A is located in town 1, what level of pollution tax will achieve the efficient level of pollution for town 1? Why will that level of tax achieve the efficient level?

(c) If source A is in town 1, and if source B is in town 2, is a uniform pollution tax or a uniform pollution standard (that is, a tax or a standard that is the same in both places) more efficient? Why?

(d) If source A is in town 2, and if source B is in town 1, does that change your answer in (c)?

Reference no: EM13551545

Questions Cloud

Provide both a graphical and intuitive explanation : Explain in details which policy you would recommend, why, and how you would recommend implementing it. What are the advantages of implementing the policy in the way that you have suggested?

How many allowances will the control authority auction : What price do you expect allowances to sell for and if the government decides to implement a tax rather than a cap-and-trade system, what should be the tax rate?

Will that have any impact on the permit price : What will happen to the price of permits if the government increases the number of permits available and Sketch the supply and demand for emission permits.

Sketch the supply and demand for emission permits : Sketch the supply and demand for emission permits. I'm not providing you with any information on demand, so just sketch any reasonable demand curve.

Marginal costs of abatement for the first source : Two pollution sources are located in the same town, immediately next to each other. For every quantity of abatement, marginal costs of abatement for the first source are higher than marginal costs of abatement for the second source.

Explain why you have answered with the policy : Explain why you have answered with the policy that you have, and explain why you have chosen that policy over the other two. (a) Which of these policies is most likely to reduce pollution?

What are the efficient price and quantity on graph : What are the efficient price and quantity on graph? What are the free-market price and quantity and efficient and free-market outcomes

Maximizing net benefits in the presence of an externality : What should be the amount of the tax? Draw a graph representing the situation - How should the government adapt its policy to respond to this new information?

What is the shape of the cost curve : What are the fixed costs for firm and how much will Beaver Forestry Corporation produce - what is the shape of the cost curve in this case?

User Account

All Pages