Question

ANSWER QUESTION 4 ONLY

3. You work for the state environmental office and have been told that you are now in charge of determining the optimal amount of pollution allowed from powerplants in the area. You recognize that emissions from this powerplant causes damage to the environment, but that it is also costly to reduce the number of emissions due to reduced production of the plant. After doing some research you find that the Marginal Damage Cost (MDC) and Marginal Abatement Cost (MAC) can be represented by the following equations:

MDC = 2e and MAC = 300 – 3e

1. (4 points) Graph the MAC and MDC curves on a single graph. How much pollution will the firm emit if there are no controls, taxes, or regulations on the total number of emissions? What is the marginal damage cost of the next emission at the unregulated number of emissions?
2. (8 points) What is the optimal amount of pollution emitted by this firm? What are the total abatement costs, total damage costs, and total pollution costs associated with the optimal level of pollution?
3. (4 points) A local environmental group is currently holding a protest where they are declaring any level of emissions as inherently wrong and that any form of pollution is an evil afront to the environment. According to them, the only right thing to do is reduce emissions down to zero. It is part of your job to reason with the protesters as to why the optimal level of emissions you calculated in part B should be followed. For your argument, calculate the Total Pollution Cost when emissions are zero and compare that to the Total Pollution Costs at the optimal level of emissions for part B. Using these numbers, what would you tell the protesters and why might they be unsatisfied with this answer?
4. (4 Points) Representative of the local small business administration has come to complain about how environmental regulations created by people like you makes it more costly to do business and, as a result, will businesses to have to lay off their hard-working employees and drive up the unemployment rate. It is part of your job to reason with the representative as to why the optimal level of emissions you calculated in part B should be followed. For your argument, calculate the Total Pollution Cost when emissions are unregulated and compare that to the Total Pollution Costs at the optimal level of emissions for part B. Using these numbers, what would you tell the local small business administrative representatives, and why might they be unsatisfied with this answer?
5. (4 points) New technology has been created that is going to reduce the cost of abating emissions from the power plant. This technology has the ability to reduce marginal abatement costs by $30. Either draw a new graph or draw a new MAC curve on your graph for part A to demonstrate this change. What is the new optimal level of pollution given this new technology? Find the total cost of pollution at this new optimal level and compare it to the total pollution costs you found in part B.

Answer 1

Whenever any firm produced any product there also discharge pollution. To protect the environment from these emissions caused any disturbance in the environment ,the firms should determines the optimal level of pollution.