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Unformatted text preview: Tax=MAC 1 =MAC 2 MAC 1 =a 1 MAC 2 =7a 2 a 1 =7a 2 a 1 +a 2 =50 a 2 +7a 2 =50 8a 2 =50 a 2 =6.25 a 1 =43.75 MAC 1 =1(43.75) =43.75 MAC 2 =7(6.75) =43.75 Kelley Benham Homework 2 AEC 3233 9. With a permit Firm 1 abates the areas in pink, gray, and dark blue. However, with a standard of 25-units, they abate the areas in gray and pink. With a permit Firm 2 abates the areas in grey and purple. With a standard, they would abate the areas in purple, gray, green, pink, and red. With the standard the entire industry suffers a lose, where as with a permit the amount gets abated with both firms paying the same amount. 10. If the two firms have identical curves, the no matter what abatement method, both firms would abate the same. In the real world, firms are not the same so a tax is the best way to encourage abatement....
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- Spring '08
- $10, $43.75, Kelley Benham