• January 25th, 2016

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.


  1. Pigouvian Tax

Marginal Benefit = MB = 250 – 2*Q

Marginal Private Cost = MPC = 10 + 0.4*Q

Marginal Damage = 0.6*Q


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


  1. 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

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

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