Q2 (22 points) You are continuing your work for the state environmental office and have recently been assigned to investigate and regulate Duke Nukem’s nuclear powerplant. You recognize that emissions from this powerplant causes damage to the environment, but that it is also costly to reduce the number of emissions due to reduced production of the plant and the ensuing layoffs that it might cause. After doing some research you find that the Marginal Damage Cost (MDC) and Marginal Abatement Cost (MAC) can be represented by the following equations:

MDC = 4e and MAC = 600 – 6e

A. (Question 2A: 4 points) Using the MDC and MAC equations, solve for the optimal level of emissions (e*) for Duke Nukem’s Powerplant

B. (Question 2B: 2 points) Using the information from question 2A, calculate the Total Damage Cost (TDC) created by Duke Nukem’s powerplant when operating at the optimal level of emissions.

C. (Question 2C: 2 points) Using the information from question 2A, calculate the Total Abatement Cost (TAC) Duke Nukem’s powerplant has to undergo when operating at the optimal level of emissions.

D. (Question 2D: 2 points) Using the information from question 2, calculate the Total Pollution Costs associated with Duke Nukem’s powerplant when operating at the optimal level of emissions.

E. (Question 2E: 2 points) A group of protesters known as the Planeteers along with their leader, Captain Planet, come to your office to complain about the damage created by Duke Nukem’s Powerplant. They want you to abate pollution down to zero units as they see any pollution as an immoral act that is destructive towards mother earth. Calculate the Total Pollution Costs associated with Duke Nukem’s Powerplant when forced to remove emissions down to zero.

F. (Question 2F: 4 points) Use the answers from questions 2D and 2E, along with the idea of assimilative capacity to address the protestors in defending your policy to allow Duke Nukem to produce at the optimum number of emissions.

G. (Question 2G: 2 Points) Representatives from the Small Business Administration Advocacy (SBAA) group approach you and asks that you remove all regulations from Duke Nukem’s powerplant and allow Duke Nukem to produce as many emissions as he wants in an effort to create jobs and stimulate economic production. Calculate the Total Pollution Costs at the unregulated maximum number of emissions.

H. (Question 2H: 2 points) Suppose you are going to have to hire a full-time regulator to enforce that Duke Nukem is in compliance with your order to operate at the optimal number of emissions. The salary of this regulator combined with Duke Nukem’s record keeping to verify his compliance with the regulations sum up to $300. Calculate the new optimum number of
emissions for Duke Nukem’s Powerplant after factoring in these enforcement costs.

I. (Question 2J: 2 points) Using the information from question 2H, calculate the total pollution costs for Duke Nukem’s Powerplant when factoring in these enforcement costs.