<p>Bear with me - this is a long question. But I did do few of the parts, but I'm posting it because it seems necessary that you know what I previously did. Sorry for the "length"! Answers are given in blockquotes.</p>

<p>MAC = Marginal Abatement Cost MDF = Marginal Damage Function </p>

<p>1) A policy maker is faced with the following MDF from the emissions of nitrous oxide: MDF = 1000 E (where E = tons of emissions). Research leads the policy maker to perceive that the industry MAC function is MAC = 130,000 – 1000E. </p>

<p>a) What will be the perceived economically efficient target of emissions?</p>

<blockquote>
  <p>Efficient target would be the situation where 
  MDF = MAC
  | 1000E = 130,000 – 1000E</p>
  
  <p>E = 65</p>
</blockquote>

<p>b) What is the emissions fee that generates that target?</p>

<blockquote>
  <p>Emission fee = MDF = 1,000E = 1,000 × 65 = 65,000</p>
</blockquote>

<p>c) What is the aggregate level of permits that generates that target?</p>

<blockquote>
  <p>Aggregate level of permit = MDF × E = 65,000 × 65 = 4,225,000</p>
</blockquote>

<p>d) If there is a thick market for permits, what will be the market price of a permit?</p>

<p>e)The actual MAC is MAC = 150,000 – 500E. Find or show the cost of an error from using an emission fee.</p>

<p>f) The actual MAC is MAC = 150,000 – 500E. Find or show the cost of an error from using cap and trade.</p>

<p>Could someone help me figure out on how to do part d, e and f?  </p>

CC BY-SA 3.0
2015-10-14T19:04:49.017Z
Please consider defining the acronyms MDF and MAC.
dismalscience
CC BY-SA 3.0
2015-10-14T20:08:16.670Z
I apologize, I have correctly defined the terms.
Dangerous Game
<environmental-economics>
MDF/MAC emissions and policies
Dangerous Game
# MDF/MAC emissions and policies

(Asked by: username_0 on 2015-10-14)

Bear with me - this is a long question. But I did do few of the parts, but I'm posting it because it seems necessary that you know what I previously did. Sorry for the "length"! Answers are given in blockquotes.

MAC = Marginal Abatement Cost MDF = Marginal Damage Function

1) A policy maker is faced with the following MDF from the emissions of nitrous oxide: MDF = 1000 E (where E = tons of emissions). Research leads the policy maker to perceive that the industry MAC function is MAC = 130,000 – 1000E.

a) What will be the perceived economically efficient target of emissions?

> Efficient target would be the situation where
> MDF = MAC
> | 1000E = 130,000 – 1000E
>
> E = 65

b) What is the emissions fee that generates that target?

> Emission fee = MDF = 1,000E = 1,000 × 65 = 65,000

c) What is the aggregate level of permits that generates that target?

> Aggregate level of permit = MDF × E = 65,000 × 65 = 4,225,000

d) If there is a thick market for permits, what will be the market price of a permit?

e)The actual MAC is MAC = 150,000 – 500E. Find or show the cost of an error from using an emission fee.

f) The actual MAC is MAC = 150,000 – 500E. Find or show the cost of an error from using cap and trade.

Could someone help me figure out on how to do part d, e and f?

**Tags:** environmental-economics

> **Comments:**
> **username_1**: Please consider defining the acronyms MDF and MAC.  
> **username_0**: I apologize, I have correctly defined the terms.  

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## 0 answers

