Question

Suppose there are two polluters in the same region. Each generates 40 units of pollution per year so that there are 80 units per year in total. The government decides that total pollution from these polluters should not exceed 32 units per year. Each polluter's marginal abatement costs (MAC) and total abatement costs (TAC) are given below. Using this information, answer the following questions. Polluter 1: MAC

1=3A 1and TAC
1=1.5(A 1 )
2Polluter 2: MAC 2=6A 2
​and TAC 2=3(A 2 ) 2
Part (a) Suppose, the government wishes to achieve the abatement goal using an emissions charge. What is the optimal emissions charge? How many units will each polluter abate?
Part (b) Suppose, instead, the government wishes to achieve the abatement goal using an emissions subsidy. What is the optimal emissions subsidy? How many units will each polluter abate?
Part (c) Suppose, instead, the government wishes to achieve the abatement goal using a cap and trade program. How many permits must the government issue? Suppose they give half to 1 Polluter 1 and half to Polluter 2. How will the permits be traded, if at all? How many units will each polluter abate?
Part (d) Which policy - the emissions charge, the emissions subsidy, or the cap and trade program - is the most cost-effective at achieving the abatement goal? Briefly explain your answer.

Answer 1

Main Answer:

A. Kouros

Step-by-step explanation:

During the Archaic Period, a male statue was commonly known as a "Kouros." These statues, characterized by their frontal stance, rigid posture, and idealized athletic physique, were prominent in ancient Greek art. The term "Kouros" originates from the Greek word for youth, reflecting the statues' depiction of young, male figures. These sculptures played a significant role in representing the idealized male form and were often associated with religious or funerary contexts.

The Archaic Period, spanning roughly from the 8th to 6th centuries BCE, marked a transformative phase in Greek art, witnessing the emergence of distinctive styles and conventions, with the Kouros statues being emblematic of the period's artistic expression and cultural ideals.

Answer 2

(a) Optimal Emissions Charge: $4 per unit; Polluter 1 abates 6 units, Polluter 2 abates 2 units.

(b) Optimal Emissions Subsidy: $1 per unit; Polluter 1 abates 4 units, Polluter 2 abates 2 units.

(c) Cap and Trade Program: 24 permits issued; Polluters abate 18 units (Polluter 1 sells 2 permits to Polluter 2).

(d) Most Cost-Effective Policy: Cap and trade, allowing market flexibility, achieves the goal with the lowest total abatement cost.

Step-by-step explanation:

In the case of an emissions charge, the government aims to set a price that internalizes the external cost of pollution. The optimal emissions charge (P*) is determined where the sum of marginal abatement costs equals the government's abatement goal. In this scenario, P* is 4 units, and Polluter 1 abates 6 units, while Polluter 2 abates 2 units.

When using an emissions subsidy, the government incentivizes polluters by providing financial rewards for abatement. The optimal subsidy (S*) is set where the sum of marginal abatement costs equals the abatement goal. Here, S* is 1 unit, leading Polluter 1 to abate 4 units and Polluter 2 to abate 2 units.

In a cap and trade program, the government issues permits equal to the abatement goal. With Polluter 1 and Polluter 2 each receiving 12 permits, they abate units based on their marginal abatement costs. Polluter 1 sells 2 permits to Polluter 2, resulting in both abating 18 units.

Comparing the policies, the cap and trade program is the most cost-effective as it allows flexibility, letting the market find the most efficient allocation of abatement efforts, resulting in the lowest total abatement cost.