Problem Set 2

. Draw the aggregate supply for emissions over all individuals, showing the price (R per kg)
on the vertical axis and the quantity of emissions (kilotons – millions of kg) on the
horizontal axis. In another graph, draw the equivalent curve for the supply of pollution,
showing the quantity of pollution on the horizontal axis (µg/m 3 ) and the price in millions
of Rubles per µg/m 3 on the vertical axis. This is the marginal savings from polluting.
Draw the marginal damage from pollution on the same graph. What is the efficient
ambient concentration of CO? Call this value S.
S = 90 ug/m 3
c. What are the average emissions per car associated with this efficient concentration of
CO? If you could observe emissions from each automobile, what emission charge would
you levy per kg of emissions per car to obtain the efficient concentration?
Target emissions = 90 kg/year
Emissions fee = 10 R/kg
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