cost of cleanup is constant at $120 per unit. What is the optimal level of pollution cleanup in each of the two regions? 12. The private marginal benefit associated with a product's consumption is PMB = 350 - 4Q and the private marginal cost associated with its production is PMC = 6Q. Furthermore, the marginal external damage associated with this good's production is MD = 4Q. To correct the externality, the government decides to impose a tax of T per unit sold. What tax T should it set to achieve the social optimum? 13. Suppose that demand for a product is Q = 1200 - 4P and supply is Q = -240 + 2P. Furthermore, suppose that the marginal
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The private marginal benefit associated with a product's consumption is PMB = 360 - 4Q, and the private marginal cost associated with its production is PMC = 6Q. Furthermore, the marginal external damage associated with this good's production is MD = 2Q. To correct the externality, the government decides to impose a tax of T per unit sold. What tax T should it set to achieve the social optimum?
Andrew D.
The marginal damage averted from pollution clean-up is MD =200-5Q. The marginal cost associated with pollution cleanup is MC = 25 +2Q. a. What is the optimal level of pollution reduction? b. Show that this level of pollution reduction could be accomplished through taxation. What tax per unit would generate the optimal amount of pollution reduction?
Haricharan G.
For firm 1, the marginal private benefit of pollution equals MB1 = 120 - 3q1. For firm 2, the marginal benefit of pollution equals MB2 = 80 - q2. Assume the marginal private cost of polluting is 0 in the absence of a tax. Some smart people have determined the socially optimal quantity of pollution is Q = q1 + q2 = 52. Assuming pollution is efficiently allocated between the firms, how much does each firm emit? Hint: Think about how you would determine the socially optimal quantity using marginal analysis. What tax results in 52 units of pollution?
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