Imagine a single firm is facing regulation that would require it to abate its emissions. It has an MAC = 40 + 2A, and when unregulated it would produce 220 units of emissions. ------ a) First, suppose the regulation is a standard that requires this firm to reduce its emissions to 180 units. What is the total cost of abatement to the firm? b) Now suppose the regulator decides to apply a tax of $120 per unit on the firm. How much will the firm pay in abatement now? c) How much will it transfer to the regulator? (Do not include commas in your answer.) d) Draw a graph with the MAC curve of the firm (extend the abatement axis to the unregulated level of emissions), and illustrate the standard and tax level. Show the costs of complying with each regulation from the firm's perspective by labels the total abatement cost area under the standard, under the tax, and the total transfer to the government under the tax. Label the axes, intercepts, and relevant prices and quantities.
Imagine a single firm is facing regulation that would require it to abate its emissions. It has an MAC = 40 + 2A, and when unregulated it would produce 220 units of emissions.
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a) First, suppose the regulation is a standard that requires this firm to reduce its emissions to 180 units. What is the total cost of abatement to the firm?
b) Now suppose the regulator decides to apply a tax of $120 per unit on the firm. How much will the firm pay in abatement now?
c) How much will it transfer to the regulator? (Do not include commas in your answer.)
d) Draw a graph with the MAC curve of the firm (extend the abatement axis to the unregulated level of emissions), and illustrate the standard and tax level. Show the costs of complying with each regulation from the firm's perspective by labels the total abatement cost area under the standard, under the tax, and the total transfer to the government under the tax. Label the axes, intercepts, and relevant prices and quantities.
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