Firm S produces steel with a cost function Cs(s,x)

Question # 00542838 Posted By: dr.tony Updated on: 06/09/2017 01:50 AM Due on: 06/09/2017
Subject Economics Topic Microeconomics Tutorials:
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Firm S produces steel with a cost function Cs(s,x) = s^2 + 10?(12x?x^2), where s is units of steel and x is units of a pollutant that is a byproduct of steel production. Another ?rm F produces ?sh with a cost function Cf(f,x) = 3f^2 +fx, where f is units of ?sh. Hence, pollution raises F's costs. Steel and ?sh are sold in internationally competitive markets, where the price of steel is $20 and the price of ?sh is $72.

a) Sketch S's marginal bene?t curve (or negative marginal cost) from pollution and F's marginal cost curve from pollution

b) Suppose S can freely dump its pollution into the lake used by F. What will be the quantity of pollution, x?, in the unregulated competitive equilibrium? How much ?sh and how much steel will be produced in this equilibrium?

c) What is the socially e?cient quantity of pollution, x???

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  1. Tutorial # 00540004 Posted By: dr.tony Posted on: 06/09/2017 01:50 AM
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