Refer to Figure 4.5. If the market consists of Homeowners A, B, and C, the socially...
Refer to Figure 4.5. If the market consists of Homeowners A, B, and C, the socially optimal level of CO2 concentrations is _________.
Figure 4.5 Individual Demand for Lowering Indoor Air Pollution (CO2) in $/yr
|
50 ppm |
60 ppm |
70 ppm |
80 ppm |
90 ppm |
|
|
Household A MWTP |
45 |
55 |
70 |
85 |
110 |
|
Household B MWTP |
0 |
0 |
10 |
35 |
60 |
|
Household C MWTP |
5 |
10 |
15 |
20 |
30 |
|
Marginal Cost of Cleanup |
240 |
150 |
95 |
65 |
50 |
Select one:
a. $95/yr
b. 70 ppm
c. $70/yr
d. 50 ppm
Homework Answers
Socially optimal level of CO2 concentration will be take place at the point where sum of MWTP of all household is equal to marginal cost of cleanup.
When the CO2 level is 70ppm, the sun of MWTP of all household is 95 and the marginal cost of cleanup is also 95.
Thus, socially optimal level of CO2 concentration is 70ppm
Answer: option (b).
Add Answer to:
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