# Environmental Economics – Excel Solver project

**Paper, Order, or Assignment Requirements**

**Please show work and give explanation on all questions.****Please explain how you got it done in**__Excel Solver__for all questions.**Assume the end-user do not have knowledge on**__Excel Solver__, please teach/explain steps on how/why the answers were done the way it is in__Excel Solver__.**This project is also for tutoring how to use Excel Solver, so please explain them well.**

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**Pigouvian Tax**

Marginal Benefit = MB = 250 – 2*Q

Marginal Private Cost = MPC = 10 + 0.4*Q

Marginal Damage = 0.6*Q

- What is the private equilibrium?
- What is the Business as Usual (BAU) level of pollution? (Hint: It’s the sum of MD over the entire quantity made.)
- What is the socially optimal quantity?
- Under what sort of philosophical rationale is this socially optimal?
- What is the DWL of being at BAU?
- What Pigouvian tax gets us to the socially optimal quantity?
- How much tax revenue is generated by this tax?
- Draw A, C, F, and G on a graph. Take a picture with your cellphone, and send it to me.

**Abatement:**

Business as Usual = BAU = 150 units of pollution

Marginal Abatement Cost (MAC) = 0.6*A

Marginal Benefit from Abatement = Marginal Damage from Pollution = 100 – 0.4*A

- What is the BAU level of abatement?
- What is the efficient level of abatement?
- What’s the DWL from BAU?
- What emissions tax would get us the optimal level of abatement?
- What would be the tax revenue from that tax? (Hint: Tax revenue = t*(BAU-A))
- What would be the total cost to firms from this tax, relative to BAU?
- What is the optimal number of permits? (Hint: Permits = BAU-A)
- What would be the price of these permits if the trading were competitive?
- Draw B and E on a graph. Take a picture with your cellphone and send it to me.

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