Two firms are ordered by the federal government to reduce


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.

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Business Economics: Two firms are ordered by the federal government to reduce
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