Answer to Question #67699 in Economics for Libby

Question #67699

The EPA has decided on new standards for PM-2.5 emitted by steel mills. There are two steel plants X and Y in the local area and they have the following abatement A schedules for PM-2.5:
Plant X TACX = 0.6AX2
Plant Y TACY = 0.15AY2
Assume each plant emits 40 units of PM-2.5 for a total of 80 units. The EPA determines the standard must be 30 units in total.
a) If the new standard is implemented uniformly, what is the total cost of abatement?
b) Find the cost-effective solution for abatement
c) What is the cost saving from moving from a uniform standard to a cost-effective solution?

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