ECON 371 Study Guide - Quiz Guide: Dwls, Aggregate Demand, Competitive Equilibrium
Document Summary
As a matter of interpretation, emissions are just negative abatements. i. e. if you create one ton of emissions you are then not abating that same ton. The mbp until their mb from pollution equals their mc of polluting (which is zero). cost of abating emissions should they be required to do so. There is a tight link between these two equations that involves a simple substitution once we know how equation can be thought of as the firm"s demand for pollution (cid:523)as polluting makes their production process more productive(cid:524). The macp then, is the firm"s marginal much they"ll produce in an unregulated market (the answer to number 1a). Dwl, we"re comparing the surplus for both consumers and producers (and sometimes government too in the case of taxes and subsidies) under two different states of the world. Usually the first state is the competitive equilibrium while the second is the socially optimal equilibrium.
