What is socially efficient level of abatement for industry, Other Subject

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What is socially efficient level of abatement for industry

Problem

For a particular industry the aggregate marginal damage cost (MD) equation is MD=200+E and aggregate marginal abatement cost (MAC) equation is MAC: 900 - 0.75E.

A. Carefully graph the MAC and MD. What is the socially efficient level of emissions for this industry?

B. What is the socially efficient level of abatement for this industry?

C. What is the total damage cost at the socially efficient level of emissions for this industry?

D. What is the total abatement cost at the socially efficient level of emissions?

E. What is the total social cost at the socially efficient level of emissions?

F. Note that the MD equation has a vertical intercept of 200. What economic interpretation would you give for this form of the MD function? In particular, what does the vertical intercept tell you about this type of emission?

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