more units of this product will the ee maik 1 produce than is socially optimal?
ID: 1139968 • Letter: M
Question
more units of this product will the ee maik 1 produce than is socially optimal? Calculate the 14. The marginal damage averted from pollution cleanup is MD 200 -5Q. The marginal cost associated with pollution cleanup is a. What is the optimal level of pollution reduction? b. Show that this level of pollution reduction could be accomplished through taxation. What tax per unit would generate the optimal amount of pollution reduction? 15. Two firms are ordered by the federal government to reduce their pollution levels. Firm A's marginal costs associated with pollution reduction is MC 20+ 4Q. Firm B's marginal costs associated with pollution reduction is MC 10 + 8Q. The marginal benefit of pollution reduction is MB 400-4Q a. What is the socially optimal level of each firms pollution reduction? b. Compare the social efficiency of three possible outcomes: (1) require all firms to reduce pollu- tion by the same amount; (2) charge a commonExplanation / Answer
Answer 14:-
a) optimal level of pollution reduction can be calculated by equating marginal damage averted from pollution cleanup and marginal cost associated with pollution cleanup.
That is, 200 5Q = 10+Q*
6Q = 190
Q = 31.66
So, the optimal level of pollution reduction is 31.66 unit.
b) Now suppose there is t tax per unit pollution, so that polluters reduce their amount of pollution. That means, untill marginal cost of cleanup is lower than the or equal to the amount of tax, polluters will clean their pollution.
So the total amountof pollution cleanup for a given tax can be written as,
10 + Q* = t
Where Q* = optimal level of pollution reduction.
So, (10 + 31.66) = 41.66 tax per unit would generate the optimal amount of pollution reduction.
please post another question separate.
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