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EC238 Lecture Notes - 23S Ribosomal Rna, X.400, Social Cost

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erinpug72
3 Oct 2014
School
WLU
Department
Economics
Course
EC238
Professor
Karen Huff

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Document Summary

E0 is the level of emissions that obtains if firms do not abatement which corresponds to an mac of 0. Therefore, the mdc is $ (25+ 800) = 825. Tdc is equal to the area under the mdc curve. Tdc = 25 x 800 + * (825-25)*2400 = ,000. Total social cost of pollution is equal to the total damage cost of ,000. b) To determine this, we need to find the level of emission by equates to mac and mdc, 25 + e* = 400 0. 5 e* Tac is equal to the area of triangle a with base 550 (800-250) and height which is equal to ,625. Tdc is equal to the area of triangle b which is (275-25) and 250 wide, plus rectangle c which is 250 wide by 25 high. Area of triangle is ,250 and area of rectangle is at ,250. Tsc is tac + tdc which is ,125.

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Related Questions

Consider the problem of carbon dioxide emissions. We will abstract from the complexity of the problem slightly, assuming there are polluters and consumers in two regions, the OECD (O) and the rest of the world (R). Suppose the marginal cost of controlling CO2 emissions is $13 per ton. Let the marginal willingness to pay for pollution reduction be 14 - Q for region O and 8 - 2Q for region R, where Q is the amount of pollution reduction.

The United Nations is considering two proposed methods for controlling CO2 emissions, both involving polluters paying for the damage they cause:

Proposal A involves the polluters paying damages to each region for the pollution generated.

Proposal B involves the polluters in each region independently negotiating pollution reductions with the consumers of their respective region, assuming the other region is not undertaking pollution reduction.

What is the socially efficient level of emissions reduction Q*? A graph of the marginal abatement cost and the total marginal willingness-to-pay curves would be helpful. (Hint: CO2 emission reduction is a global public good)

How much total pollution reduction will occur under Proposal A and what will be the total compensation received by regions O and R? If those payments were instead placed in the general coffers of the UN, would the outcome be any different from an efficient point of view? Why or why not?

How much pollution would be generated under Proposal B? Explain any differences between this answer and the answer to parts (a) and (b).

home / study / business / economics / economics questions and answers / suppose that a given district has two massive aluminium smelters, smelter 1 and smelter 2, ...

Question: Suppose that a given district has two massive aluminium smelters, smelter 1 and smelter 2, that t...

Suppose that a given district has two massive aluminium smelters, smelter 1 and smelter 2, that transform “alumina” (extracted from bauxite) into aluminium. So the smelters use alumina as an input, but its use leads to emissions of aluminium flourides (F) as particulates into the air, creating health problems for some residents in the district’s nearby city.

Suppose next that the district government cannot reliably observe the individual F emissions of the two smelters, only the overall FTotal. However, the government can reliably track the individual smelter’s use of the alumina input, A1 and A2, in metric tonnes.

a. Suppose aggregate MAC =600000 – 1000FTotal, and MAB = 500 FTotal.

Please identify the socially optimal level of FTotal. Show your work.

Ftotal=400

b. If the two smelters just look to their own profits, what will FTotal be?

MAC=0 600,000-1000Ftotal=0 Ftotal=600

c. Suppose that government scientists have a good estimate of the relationship between alumina use and total F air pollution: FTotal = .001(A1 + A2)

What must the combined level of alumina inputs (A1 + A2) be capped at to achieve the socially optimal FTotal from part (a)?

400=0.001(A1+A2) A1+A2=400,000

d. We can express the two smelters’ aggregate MAC over F as their aggregate MAC over the use of A. If MAC = 600000 – 1000FTotal = 600000 – 1000*.001(A1 + A2) = 600000-1(A1 + A2)=600000-ATotal.

At what tax per metric tonne of A would the two smelters cut back to a combined purchase of the socially optimal level of ATotal*?

?????

e) Suppose that smelter 1’s newer production techniques are such that it doesn’t need nearly as much alumina as smelter 2 to be viable, but finds it far more costly to reduce its use of the input:

MAC1 = 600000 – 6A1

MAC2 = 600000 – 1.2 A2

How would the two smelters respond to a tax of $200,000 per tonne of A?

?????

f) what is the A reduction cost borne by the two smelters individually as a result of the tax, and thus the total reduction cost?

?????

g) Next suppose that the district government thinks a tax on purchases of A is too complicated to administer, or unpopular with the smelters. Instead, it just says that “neither smelter may use more than 200,000 tonnes of alumina.”

What would the resulting total level of A use be from the two smelters, given their particular MAC curves? What would the total A reduction cost be of this policy?

??????

2a. FTotal* = _________________.

2b. If both firms pay nothing for emissions, then when maximising profit FTotal = ______________.

2c. To achieve the FTotal* found in 2a), ATotal* = _________________.

2d. The two smelters would cut back to ATotal* at a tax of $ per tonne.

2e. At the tax found in 2d), Smelter 1 would choose A1* = ___________ tonnes of alumina.

At the tax found in 2d), Smelter 2 would choose A2* = ___________ tonnes of alumina.

2f. The cost of reducing A1 use to Smelter 1 under this tax is $ ______ . (This does not

include the tax paid by Smelter 1 to the government for the A it continues to use.)

The cost of reducing A2 use to Smelter 2 under this tax is $ . (This does not

include the tax paid by Smelter 2 to the government for the A it continues to use.)

So the total A reduction cost from the tax is $ ____ .

2g. With the uniform rule of a 200,000 cap in A use, Smelter 1 would use A1 = ___________.

Smelter 2 would use A2 = ______________. So the total A use would be ______________.

The cost of reducing A1 use to Smelter 1 under this rule is $______________.

The cost of reducing A2 use to Smelter 2 under this rule is $______________.

So the total A reduction cost from this rule is $________________.

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