Suppose that the MD = 5E and with its current technology, thefirm’s MAC is given by
MAC1 = 200 – 5E.
a) Determine the socially optimal level of emissions E.
b) Determine the emissions tax that would achieve the sociallyoptimal level of emissions.
Now suppose the firm can adopt a new technology that changes is MACto
New MAC2 = 160 – 4E
Calculate change in costs for the firm from adopting the newtechnology when:
c) The government uses an emissions standard equal to your answerin (a) above
d) The government uses an emissions tax equal to your answer in(b)
(Assume no change to standard or tax rate after the change intechnology)
Now suppose the government adjusts the standard and/or the tax suchthat MD = New MAC. Calculate the change in total costs for the firmfrom adopting the new technology when:
e) The government adjusts the standard, and
f) The government adjusts the tax rate
Need help with part e and f
