BASD505 Assignment 4 v2

# BASD505 Assignment 4 v2 - TypeA(x10) MAC(a)=200010*Z(a)...

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Type A (x10) Type B (x4) Type C (x8) MAC(a)= 2000-10*Z(a) MAC(b)= 2000-4*Z(b) MAC(c)= 1000-4*Z(c) 10*Z(a)= 2000-MAC(a) 4*Z(b)= 2000-MAC(b) 4*Z(c)= 1000-MAC(c) Z(a)= 200- 0.1*MAC(a) Z(b)= 500- 0.25*MAC(b) Z(c)= 250- 0.25*MAC(c) 10 Type A Firms 4 Type B Firms 8 Type C Firms 10*Z(a)= 2000-MAC(a) 4*Z(b)= 2000-MAC(b) 8*Z(c)= 2000-2*MAC(c) \$0 < MAC(agg) < \$1000  Z(agg)= Z(a)+ Z(b)+ Z(c) Z(agg)= [2000-MAC(a)]+ [2000-MAC(b)]+ [2000-2*MAC(c)] Per Equi-mariginal principle: MAC(agg)= MAC(a)= MAC(b)= MAC(c) Z(agg)= 6000-4*MAC(agg) MAC(agg)= 1500-0.25*Z(agg) \$1000 < MAC(agg)  Z(agg)= Z(b)a+ Z(b) Z(agg)= [2000-MAC(a)]+ [2000-MAC(b)] Per Equi-mariginal principle: MAC(agg)= MAC(a)= MAC(b) Z(agg)= 4000-2*MAC(agg) MAC(agg)= 2000- 0.5*Z(agg) Z MAC(agg) MD 0 2000 0 200 1900 50 400 1800 100 600 1700 150 800 1600 200 1000 1500 250 1200 1400 300 1400 1300 350 1600 1200 400 1800 1100 450 2000 1000 500 2200 950 550 2400 900 600 2600 850 650 2800 800 700 3000 750 750 3200 700 800 3400 650 850 3600 600 900 3800 550 950 4000 500 1000

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4200 450 1050 4400 400 1100 4600 350 1150 4800 300 1200 5000 250 1250 5200 200 1300 5400 150 1350 5600 100 1400 5800 50 1450 6000 0 1500 b) Socially optimal level of production is when level of emissions (Z) is 3,000 and the marginal c c) The regulator should set tax/unit at the marginal cost of abatement (MAC) that reduces emis d)  Type A (x10) Type B (x4) Type C (x8) MAC(a)= 2000-10*Z(a) MAC(b)= 2000-4*Z(b) MAC(c)= 1000-4*Z(c) 10*Z(a)= 2000-MAC(a) 4*Z(b)= 2000-MAC(b) 4*Z(c)= 1000-MAC(c) Z(a)= 200- 0.1*MAC(a) Z(b)= 500- 0.25*MAC(b) Z(c)= 250- 0.25*MAC(c) 10 Type A Firms 4 Type B Firms 8 Type C Firms 10*Z(a)= 2000-MAC(a) 4*Z(b)= 2000-MAC(b) 8*Z(c)= 2000-2*MAC(c) Z(a)= 2000- 750 Z(b)= 2000- 750 Z(c)= 2000- 2*750 Z(a)= 1250 Z(b)= 1250 Z(c)= 500 Z(a)/firm= 1250/10= 125 Z(b)/firm= 1250/4= 312.5 Z(c)/firm= 500/8= 62.5 Type A and B firms would produce at emissions levels of 1250 and type C firms would produce
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## This note was uploaded on 04/21/2010 for the course BUSINESS basd505 taught by Professor Clive during the Spring '10 term at UBC.

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BASD505 Assignment 4 v2 - TypeA(x10) MAC(a)=200010*Z(a)...

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