-Suppose the government wishes to regulate mercury emissions of factories in a specific industry by either setting an emissions standard or imposing an emissions fee (per ton of mercury).The government is uncertain as to the marginal abatement costs,which may be high (MC₁)or low (MC₂).
MC₁ = 15M + 500
MC₂ = 15M - 500
where M is the units of mercury abated.The government believes there is a 50% chance of each of the marginal abatement costs.The marginal benefit of abatement is known to be:
MB = 1500 - 10M
a.What is the optimal level of emissions for each of the cost curves above?
b.What is the expected marginal abatement cost (equation)?
c.What is the optimal emissions standard according to the expected abatement costs?
d.What is the optimal abatement fee according to the expected abatement costs?
e.Which regulation will result in a lower DWL in the presence of the uncertainty? Explicitly compute the expected DWL arising from each proposal.

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-Suppose the government wishes to regulate mercury emissions of factories in a specific industry by either setting an emissions standard or imposing an emissions fee (per ton of mercury).The government is uncertain as to the marginal abatement costs,which may be high (MC₁)or low (MC₂).
MC₁ = 15M + 500
MC₂ = 15M - 500
where M is the units of mercury abated.The government believes there is a 50% chance of each of the marginal abatement costs.The marginal benefit of abatement is known to be:
MB = 1500 - 10M
a.What is the optimal level of emissions for each of the cost curves above?
b.What is the expected marginal abatement cost (equation)?
c.What is the optimal emissions standard according to the expected abatement costs?
d.What is the optimal abatement fee according to the expected abatement costs?
e.Which regulation will result in a lower DWL in the presence of the uncertainty? Explicitly compute the expected DWL arising from each proposal.

-Suppose the Government Wishes to Regulate Mercury Emissions of Factories