Question 7 1 / 1 point If the following equations describe the marginal abatemen

Question

Question 7 1 / 1 point If the following equations describe the marginal abatement costs of air pollution from industrial sources (T) and vehicles (V) and before abatement industrial sources emitted 5,000 tonnes and vehides emitted 3,000 tonnes, what effluent fee would achieve an overall reduction of 20% of initial emissions? MAG = 100 + 0.05A; ????-200 ? $200. $180 C $270 C We cannot determine the correct fee from the information provided. Question 8 0 1 pointe An industry has four firms that emit industrial waste into a lake. Given the information in the following table on emissions by firm and each firm's constant marginal abatement cost, how many permits would the regulatory authority need to issue to obtain abatement of 25 percent of industry emissions and at what price would the permits trade? Firm Emissions (tonnes) MAC ($/tonne Firm B 500 400 1001 200 150 180 Firm C Firm De Total 1000

Explanation / Answer

Question 7

Total reduction in emission = 20% of (5000 + 3000) = 1600. Now MAC for vehicles is fixed at $200 while the MAC for Industrial sources at this emission abatement is 100 + 0.05*1600 = 180. Since MACI < MACV it is more efficient to use industrial sources to reduce pollution. An emission fee is equal to the marginal abatement cost at the desired level of abatement. Hence emission fee should be $180.

Question 8

Since abatement is 25%, the government is allowing pollution level at 1000 - 25% of 1000 = 750 tons. Each permit allows a ton of emission so total number of permits is 750. Now the price would be minimum of MAC because that would be efficient if sale and purchase of permits has to occur. This implies correct choice is 3rd option.

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