EC238 Final: EC238 Final Exam - Review

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Given a hypothetical marginal abatement cost and marginal damages for emissions. Md = 10e, mac = 600 5e. Point where md = mac is the socially efficient pollution level of emissions, e: this is the level of emissions that: minimizes the sum of abatement plus damage costs and maximizes net social gains. Before a standard is imposed, the factory can release emissions up to the point where its mac curve equals 0 (equal to eo) If the socially efficient pollution level of emissions is below maximum emissions, it becomes an upper limit for emissions of the factory. If emissions are reduced in accordance with the standard, the total abatement cost is equal to the area under the mac curve from the equilibrium point to maximum emissions according to the mac curve (e* to eo) Another name for these total abatement costs is the compliance costs of meeting the standard.

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