Marginal cost ($) of reducing particle emissions 2,500 2,000 1,500 8 1,000 900 -
ID: 1160461 • Letter: M
Question
Marginal cost ($) of reducing particle emissions 2,500 2,000 1,500 8 1,000 900 - Pollution charge 500 300 10 20 30 40 50 Quantity That Particle Emissions Are Reduced EXHIBIT 14-3 A Pollution Charge Exhibit 14-3 shows a pollution charge set at $1000 per pound of emissions. Let us assume we are talking about NOx emissions. (The bottom axis is pounds of emissions.) Describe how companies in the industry emitting NOx would react if the pollution charge was changed to $1500 per pound of emissions. Be as specific as you can given the information provided.Explanation / Answer
With the increase in pollution charge from 1000 to 1500 per pound of emissions, industries would have to bear more cost for producing NOx emissions. The increased price would be an increase in marginal social cost in order to reduce the negative externality being caused to society through NOx emissions. So industries would produce till the marginal social benefit equals to cost and be at optimal production levels by reducing the output being produced. So with the increase in charges from 1000 to 1500 per pound of emissions, the quantity of particles of Nox gets reduced to 40.