UMass

RESEC 262 Summer

Problem

6) In the graph below, marginal enforcement costs have been added to

aggregate marginal abatement costs to indicate that enforcement costs are

an additional cost of controlling emissions.

Aggregate Marginal Abatement Coggregate Marginal Damage

($)

Aggregate Marginal Abatement Cost plus Marginal Enforcement Costs

Emissions

EU

a. In the graph identify the efficient emissions tax and the efficient level

of emissions. [2 points]

b. Explain why the efficient emissions tax is lower than the value that

equates Aggregate Marginal Damage to Aggregate Marginal

Abatement Cost plus Marginal Enforcement Costs. [2 points]