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Unformatted text preview: and pollution is fixed for both firms. Consider the following information regarding the costs (in dollars) of producing rubber at the two firms: Fireyear: costs=300+2Q 2 f Marginal costs = 4Q f Goodstone: costs=500+Q 2 g Marginal costs = 2Q g Total pollution emission generated are E f + E g = Q f +Q g . The marginal damage from pollution is $12 per ton of pollution. a) In absence of regulation, how much rubber would be produced by each firm? What is the profit for each firm? b) The local government decides to impose a Pigovian tax on pollution. What is the proper amount of such a tax per unit of emissions? c) What are the post regulation levels of rubber output and profits for each firm?...
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This note was uploaded on 01/27/2011 for the course ARE 176 taught by Professor Farzin during the Fall '08 term at UC Davis.
- Fall '08