Total control costs and government revenues

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Reference no: EM13743112

Two power plants are currently emitting 8,000 tons of pollution each (for a total of 1,600 tons). Pollution reduction costs for Plant 1 are given by MCR(1)=.02Q and for Plant 2 by MCR(2)=.03Q, where Q represents the number of tons of pollution reduction. Analyze the effects of the following policies in terms of control costs for each firm, total control costs, government revenues, and total pollution reduction:

a) a regulation requiring each plant to reduce its pollution by 5,000 tons.

b) a pollution tax of $120 per ton of pollution emitted

c) a transferable permit system in which permits for emission of 6,000 tons of pollution are issues, 3,000 to each plant

Reference no: EM13743112

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