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timofeeve [1]
3 years ago
10

Two firms are ordered by the federal government to reduce their pollution levels. Firm A’s marginal costs associated with pollut

ion reduction is MC=150+3Q. Firm B’s marginal costs associated with pollution reduction is MC=10+9Q. The marginal benefit of pollution reduction is MB=250−4Q. a. What is the socially optimal level of each firm’s pollution reduction?
Compare the social efficiency of three possible outcomes: (1) require all firms to reduce pollution by the same amount; (2) charge a common tax per unit of pollution; or (3) require all firms to reduce pollution by the same amount, but allow pollution permits to be bought and sold.
Business
1 answer:
Paul [167]3 years ago
5 0

Answer:

Given marginal costs and benefit

for firm A: MC=150+3Q

for firm B: MC=10+9Q

Marginal Benefit: MB=250-4Q

Socially optimal level of each firms pollution reduction

MC=MB

150+3Q=250-4Q

7Q=100

Q=14.3

for firm B

10+9Q = 250-4Q

13Q=240

Q=18.5

HERE THE THREE SCENARIOS

1) iF BOTH FIRMS ARE REQUIRED TO REDUCE POLLUTION BY THE SAME AMOUNT THEN

Total surplus is equal to total benefit minus total cost. The total benefit is equal to the area under the marginal benefit curve

The same total reduction could be achieved by requiring each firm to reduce pollution by 25.6 units. This would be less efficient than the social optimum since it would be less costly for firm B to reduce pollution by more and for firm A to reduce pollution by less

2)A common tax could be used to achieve the social optimum. Setting a tax of 250-4Q would lead firm A (respectively, B) to reduce pollution to the point where MC A = 250-4Q (respectively MC B = 250-4Q). Solving gives Q A = 14.3 and Q B = 18.5

3)POLLUTION PERMITS LEADS TO PROBLEM OF INTERNALIZATION

Requiring both firms to reduce pollution by 25.6 units but allowing them to trade pollution permits can also be used to achieve the social optimum.

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Prepare the issuer's journal entry for each of the following separate transactions.
jeka57 [31]

Answer:

a.

March 1

Debit  : Cash $318,500

Credit : Common Stock $198,000

Credit : Excess of Par $120,500

<em>Being Issue of Par value Shares for $318,500 cash</em>

b.

April 1

Debit  : Cash $84,000

Credit : Common Stock $84,000

<em>Being Issue of no Par value shares for $84,000 cash</em>

c.

April 6

Debit  : Inventory $53,000

Debit : Note Receivable $103,000

Credit : Common Stock $68,000

Credit : Excess of Par $88,000

<em>Being Issue of Par value Shares for Inventory and Note Receivable</em>

Explanation:

Note: We are instructed to prepare journals from the issuer`s point of view and this needs to be followed.

When shares are issued, the Common Stock increases :

a. For par value Common Stocks, any price paid in excess of par value is accounted in Excess of Par Reserve.

b. For no par value shares, there is no Excess of Par Reserve, we simply record the increase in Common Stock at the price paid for.

3 0
3 years ago
In early year 8, Alice sold Tom, her son, 20 shares of common stock for $20,000. Alice had paid $25,000 for the stock in year 2.
Tema [17]

Answer:

He must report 15,000 gain in his year 8 tax...........

4 0
2 years ago
________ refers to the total value of all the exports and imports of the world's nations.
Musya8 [376]
<span>World trade refers to the total value of all the exports and imports of the world's nations.</span>
3 0
3 years ago
Rodriguez Company completed its income statement and comparative balance sheet for the current year and provided the following i
Oxana [17]

Answer and Explanation:

The preparation of the operating activities section is shown below:

                                         Rodriguez Company

                             Statement of Cash Flows (partial)

Cash flows from operating activities:  

Net loss $ (6,400)  

Adjustments  

Add: Depreciation expenses $4,500

Add: Amortization of copyright $200

Add: Decrease in accounts receivable $5,000  

Add: Increase in salaries payable $11,000  

Less: Decrease in other current liabilities -$1,800

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The negative sign reflects the cash outflow and the positive sign reflects the cash inflow

3 0
3 years ago
A company developed the following per-unit standards for its product: 2 gallons of direct materials at $8 per gallon. Last month
Radda [10]

Answer:

$880 favorable

Explanation:

The computation of direct materials price variance for last month is shown below:-

Direct material price variance = Actual quantity × (Standard price - Actual price)

= 2,200 × ($8 - ($16,720 ÷ 2,200)

= 2,200 × ($8 - 7.6)

= 2,200 × $0.4

= $880 Favorable

Therefore for computing the direct materials price variance for last month we simply applied the above formula.

4 0
3 years ago
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