Question: QUESTION 10 Soot is considered the second largest cause of global warming. It is emitted from a v…

01 May Question: QUESTION 10 Soot is considered the second largest cause of global warming. It is emitted from a v…

Posted at 05:50h in 2Past Paper by Exams

QUESTION 10 Soot is considered the second largest cause of global warming. It is emitted from a variety of sources, but most notably from vehicles. Damian owns a logistics company that has a very large fleet of diesel trucks. The Australian Government recently introduced legislation that charges companies based on the amount of emissions of their fleets that are above 5% soot. They can either opt to meet the 5% target and pay no permit cost (Process D), or purchase permits entitling them to pollute in excess of 5% (but this will also incur a cost to modify their fleet using Processes A, B, and C) Process Soot emissions%) Costs to modify Damian’s fleet with Process (S 0 10 100 700 1200 thousand) Permit cost (S thousand) 1500 1100 300 a. A tax would involve levying a charge on all emissions of soot. The goal of this would be to make the marginal private cost of emitting soot more closely reflect the marginal social cost. To maximise efficiency, the value of the tax should ideally be equal to what? Type MSB for Marginal Social Benefit of emitting soot, MEC for Marginal External Cost of emitting soot, DWL for the Dead Weight Loss of emitting the soot, N for None of these options b. Consider the Government altered its goal and instead aimed for soot emission levels of 8%. What would be the total cost to society in the logistics industry if there were a total of 13 firms of the same size as Damian’s who all operated at this 8% level (including Damian)? Answer in millions of dollars (to one decimal place)? S million C. Given the cost of permits provided in the question, and if Damian was free to choose any level of emissions to operate, what process would Damian opt for? . Type A, B, C, or D

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