revmid2ee11 - Review Second Challenge Environmental...

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Review: Second Challenge Environmental Economics: ECO 345 Fall 2011 The following questions review only the class notes since the last homework. The formulas provided below will also be provided on the challenge. All questions come from the notes. Also review the second homework, chapters 12.1-12.4, 11.3, 13.2, 15, and 15.2b. Finally, we have several graphs to know, but they are all similar. a. Goods with externalities (e.g. Figure 28 in the notes). b. Emissions with multiple polluters and victims (e.g. Figure 30). (a) Emissions with a monopolist (e.g. Figure 31). (b) Emissions standard (e.g. Figure 32). (c) Technology standard (e.g. Figure 33). (d) Tradeable permits (e.g. Figure 34). (e) Liability (e.g. Figure 35) c. Single industry pollution under uncertainty (e.g. Figure 37). (a) Pigouvian tax with uncertainty (e.g. Figure 37). (b) Tradeable permit with uncertainty (e.g. Figure 38). (c) Safety valves (e.g. Figure 42). The following formulas may be useful: Efficient Allocation and market allocation of goods with externalities, Profits P S = MC ( S ) + MD ( S ) , P S = MC ( S ) , π = p · S - C ( S ) - payments (1) Efficient Allocation and market allocation of emissions MD 1 ( E ) + MD 2 ( E ) = MD ( E ) = MC ( E ) = MC 1 ( E 1 ) = MC 2 ( E 2 ) (2) MC ( E 0 , 1 ) = MC ( E 0 , 2 ) = 0 , E = E 1 + E 2 , E 0 = E 0 , 1 + E 0 , 2 (3) Pigouvian Tax, Tradable permit t = MD 1 ( E ) + MD 2 ( E ) = MD ( E ) = MC ( E ) = MC 1 ( E 1 ) = MC 2 ( E 2 ) (4) 1
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P = MD 1 ( E ) + MD 2 ( E ) = MD ( E ) = MC ( E ) = MC 1 ( E 1 ) = MC 2 ( E 2 ) (5) Monopolist, market and Pigouvian tax MR = MC, P ( q ) = MC ( q ) + MD ( q ) (6) t = MD 1 ( q ) + MD 2 ( q ) = MD ( q ) = MC ( q ) , MR = t + MC (7) Compliance costs, Pigouvian Tax vs emissions standard Cost = 1 2 ( E 0 , 1 - E ) ( MC 1 ( E ) - 0) + 1 2 ( E 0 , 2 - E ) ( MC 2 ( E ) - 0) (8) Cost = 1 2 ( E 0 , 1 - E 1 ) ( t - 0) + 1 2 ( E 0 , 2 - E 2 ) ( t - 0) (9)
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