The new mayor has pledged to reduce air pollution and the

Reference no: EM13379023

The new mayor has pledged to reduce air pollution, and the only source of air pollution in the city are two cement plants, plant A and plant B. 25 years ago, when plant A was constructed, the cement production technology produced a lot more pollution; it therefore has a pollution abatement cost of 5c3, where c is a unit of pollution. Plant B was constructed 2 months ago; it has a pollution abatement cost of 10c2. Assume that neither plant is initially engaging in pollution abatement. The per unit benefit to a unit of pollution abatement is constant at $1500. Unless told otherwise, assume the plants are owned by different firms.

A) marginal abatement cost for plant A is 15c^2

marginal abatement cost for plant B is 20c

B) at social optimal level

15c^2 + 20c = 1500

3c^2 + 4c = 300

we get c=9.35

plant A contribution =1312

plant B contribution= 188

Reference no: EM13379023

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