Consider the following marginal abatement costs (MC) for a firm using an old abatement technology, where costs are in thousands of dollars. MC=0.5Q

a) Assume that the regulatory authority has set an abatement standard (QST) equal to 40 units for each firm. Find the total abatement costs.

b) Now assume that the regulatory agency has proposed an emission charge implemented as a constant per unit tax (t) of $10 (in thousands).

i) How many units will the firm choose to abate? _____ units

ii) What will the firms total abatement costs be? $

iii) What will be the total paid by the firm in taxes? $

c) If the government implements an emission charge, what would be the cost savings to the firm? $

d) Now assume the firm decides to invest in new technology and their marginal costs become:M-0.25Q where costs are in thousands

Also assume the government keeps the $10 (thousand) per unit charge on emissions and the standard (QST) remains at 40 units.

i) How much would the firm choose to abate?

ii) What would be the total cost of abatement? $

iii) How much would the firm have to pay in taxes? $

iv) What would be the total cost savings to the firm from implementing the new technology from the answer you found in part (a)?