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Homework answers / question archive / Assume that two power plants, Firm 1 and Firm 2, release sulfur dioxide (SO2)in a small urban community that exceeds the emissions standard
Assume that two power plants, Firm 1 and Firm 2, release sulfur dioxide (SO2)in a small urban community that exceeds the emissions standard. To meet the standard, 30 units of Soz must be abated in total. The two firms face the following abatement costs: MAC, = 16 + 0.5A, MAC2 = 10 + 2.5A2, (where costs are measured in thousands of dollars.) a. Prove that a uniform standard will not meet the cost-effectiveness criterion. (Meaning both firms must abate the same amount. Since the standard is 30, each firm must abate 15 units each. Think about the summer/winter homework question). b. Calculate how the abatement levels should be reallocated across the two firms to minimize costs, Paragraph B 1
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