Asked by Irina Eriomov on Apr 29, 2024
Verified
The marginal social costs and abatement costs of a certain type of air pollution for a factory are given as:
MSC = -1121 + 22.5Q MCA = 879 - 17.5Q,
where Q = units of pollution per day, and MSC and MCA are measured in dollars. The factory is located in a small town that is currently setting community standards. You have been hired to perform the analysis requested below.
a. If the community wishes to set a pollution standard for the factory, what daily level of pollution should be allowed?
b. As an alternative, some members of the town council favor an emissions tax for the factory. If a tax is implemented, at what level should the tax be set?
Marginal Social Costs
The additional cost incurred by society as a whole from the production of one more unit of a good or service.
Abatement Costs
Expenses incurred by firms to reduce environmental negatives, such as pollution.
Pollution Standard
Pollution standards are regulatory norms established by governments or international bodies to limit the concentration of harmful substances released into the environment.
- Assess the efficiency of pollution mitigation strategies in terms of their economic and societal implications.
Verified Answer
-1121 + 22.5Q = 879 - 17.5Q
-2,000 = -40Q
Q = 50
50 units of pollution is optimal.
b.To determine tax, examine MSC or MCA at optimal level.
MCA = 879 - 17.5(50)
MCA = 4
set tax = MCA = MSC = 4.
Learning Objectives
- Assess the efficiency of pollution mitigation strategies in terms of their economic and societal implications.
Related questions
Consider a Situation in Which the Government Has Limited Information ...
How Much Pollution Can the Oceans Tolerate
A Trade-Off of Using Tradable Pollution and Resource-Use Permits to ...
The Market Approach in Which Governments Grant Tradable Pollution and ...
Taxes Are a More Effective Method of Controlling Pollution Than ...