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ECON 3220 (17)
Ali Kamar (17)

Chpt 5 Pt 3.docx

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ECON 3220
Ali Kamar

Efficent abatement using equal marginal principle- 2  The aggregate MAC cruve can be used to determine the efficient pollution abtement by two or more firms as the aggregate MAC statisfies the qual marginal principle Socially efficient level of emissions  Socially efficient level of emissions is where the total social costs imposed on society is minimized  Total social costs (TSC) = total damage costs (TDC) + total abatement costs (TAC) o TSC=TDC+TAC  Minimzied at point E* where MD=MAC o AT E* MD=MAC, E decreases by M E E*  TDC= A  TAC=B  TSC=A+B o At E no pollution ocntol, this is competitive market level emission  TDC= A+B+C  TAC= 0  TSC = A+B+C  DWL for no control = C Efficient abatement by two or more firms  Step 1: Find vertical and horizontal intercepts of the MAC curves  Step 2: draw both MAC1 and MAC2 on the same graph. Showing MAC values on y-axis and emissions on x-axis. SO emissions will be from left to right and abatement will be read from right to left.  Step 3: Derive the agg. MAC curve and draw on the same graph  Step 4: Draw a vertical line representing the abatement target by counting units right to left  Step 5: Draw a horizontal line from the point of intersection on the vertical axis  Step 6: Intersection of this line with the two individual MAC curve will give the efficient abatement of two firms (E1 and E2)  Step 7: To add more firms draw their MAC curves, re-draw the agg MAC curve and repeat 5-7. Class exercise #3  Let MAC1= 100-10E and MAC2 = 50-10E2 for two polluting firms o A) Graph each function and compute the a
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