The Marginal Cost of Pollution Is MC = 2Q, While

question 24

Essay

The marginal cost of pollution is MC = 2Q, while the marginal abatement cost is MAC = 12 - Q. Government regulators incorrectly estimate the marginal abatement cost at MAC_E = 9 - Q. The level of pollution, measured in tons of glop, is Q.
a. Solve for the socially optimal level of pollution by using MAC.
b. Based on the government's incorrect estimate of marginal abatement costs, what does the government think is the socially optimal level of pollution?
c. If the government uses a quota to intervene in the market, how much pollution will be omitted?
d. If the government taxes each ton of glop, how much pollution will be omitted?
e. Does quantity restriction or the price-based intervention get us closer to the socially optimal output level?

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Definitions:

Aircraft

A vehicle designed for air travel, equipped with wings and engines, that can carry people or cargo through the atmosphere.

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Individuals or companies engaged in the construction of ships and other floating vessels.

Product Layout

An arrangement in factories where the production equipment is organized according to the sequence of production operations, with materials moving along a line from one workstation to the next.

Inflexible

Lacking the capability or willingness to adapt or change in response to different circumstances or needs.