HW 6q - AEM 250 Environmental and Resource Economics Spring...

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AEM 250, Environmental and Resource Economics, Spring 2004 Homework #6: Pollution Policies (Distributed April 2, Due at beginning of class April 9) 1. ( worth 20 percent ) You are an EPA economist. After extensive research, you have estimated the marginal benefit curves reported below for two categories of “air quality consumers”, with respect to sulfur emissions reductions as: MB 1 = $1.5 - .0075A MB 2 = $0.5 - .0025A A denotes the amount of sulfur emissions reduction. Assume there are only two point sources of sulfur dioxide to worry about: the power company and the copper smelter indicated below. Source: Chapman 2000, p. 204. 15
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What is the optimal level of emissions reduction in the region? What is the optimal level of pollution from each of these two point sources? Use the following Minimum Marginal Pollution Control Cost curve derived from the abatement cost information in Table 11.9 above. Be sure to understand how this minimum abatement cost function was calculated.
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