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(A) According to the EPA’s prospective analysis of the 1990 to 2010 period, total social benefits (TSB) associated with the CAAA of 1990 are estimated at $690 billion ($1990) and the comparable total social cost (TSC) estimates are $180 billion ($1990).
a. Explain why these data do not communicate whether the regulations outlined by the CAAA of 1990 are efficient.
b. Using three separate graphs of conventionally-shaped TSB and TSC functions show that these values indicate that the regulations outlined in the CAAA of 1990 are
(i) efficient;
(ii) too lenient; and
(iii) too stringent.
c. Graph the MSB and MSC functions on the same diagram. Show the regionally-based set of standards (ALA and AREMAINDER) that should be recommended to achieve allocative efficiency in each region. Find the numerical value of each standard.
d. A uniform abatement standard (AST) is also being considered across the State of California of 300 units. Use the criterion of allocative efficiency to support or refute this alternative.
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