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Two firms are ordered by the federal government to reduce their pollution levels. Firm A's marginal cost associated with pollution reduction is MC=150+3Q. Firm B's marginal cost associated with pollution reduction is MC=9Q. The marginal benefit of pollution reduction is MB=270. What is the socially optimal level of each firms pollution reduction? Compare the social of three possible outcomes: (1)require both firms to reduce pollution by the same amount. (2) charge a common tax per unit of pollution. (3) require both firms to reduce pollution by the same amount, but allow pollution permits to be bought and sold.

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M91998432

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