3. The following table summarizes the marginal abatement cost functions for an i

Question

3. The following table summarizes the marginal abatement cost functions for an industry with three difference sources of pollution Source Marginal Abatement Cost MAC,-200-4EA MACp = 250-5EB MACc-100-2Ec The marginal damage cost equation for the industry is equal to MDC-2E a. If the regulatory authority charged an emission tax of $50 per unit of emissions what is the level of emissions and the total abatement cost of each source? Is the tax cost effective? b. If the regulatory authority imposed a uniform standard of 25 units of emissions for each source what is the total abatement cost of each source? Is the uniform standard cost effective?

Explanation / Answer

Tha). In the Marignal abatement cost function, put MAC =0,5,10.....50 and calculate E by using the equation

E(A) = (200 - MAC(A))/4, we get the below table and when emission tax of $50 per unit , the emission would be 37.5 units

E(B) = (250 - MAC(B))/5, we get the below table and when emission tax of $50 per unit, the emission would be 40 units

E(C) = (100 - MAC(C))/2, we get the below table and when emission tax of $50 per unit, the emission would be 25 units

and total abatement cost = 1/2*(diffrence between new MAC and 0)* (difference between 50 and new emission)

So from below table , we can see total abatement cost is 312.5 when emission tax is $50 per unit for MACA

total abatement cost is 250 when emission tax is $50 per unit for MACB

total abatement cost is 625 when emission tax is $50 per unit for MACc

emission (per tonne) MAC(A) TAC (A) 50.0 0 0.0 48.8 5 3.1 47.5 10 12.5 46.3 15 28.1 45.0 20 50.0 43.8 25 78.1 42.5 30 112.5 41.3 35 153.1 40.0 40 200.0 38.8 45 253.1 37.5 50 312.5

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