emisions eRegiring mokin assuming that the permits would not be transferable. these programs is being forced to interalize the externality of "second-hand"smoke and will be worse off.Society will be better off if the benefits of a particular proposal outweigh the cost of implementing that proposal.Unfortunately,the benefits of reducing second-hand smoke are uncertain,and assessing those benefits iscos a.A bill is proposed that would lower tar and nicotine levels in all cigarettes. The smoker will most likely try to maintain a constant level of consumption of nicotine,and will increase his or her consumption of cigarettes.Society may not beefit from this pan if the total amount of tar and nictine same. b.A tax is levied on each pack of cigarettes sold. Smokers might,pipes,or might start rolling theirown cigarettes.The demand for cigarettes.Again,it is questionable whether society will benefit. c.Smokers would be required to carry government issued smoking permits at all times Smoking permits would effectively transfer property rightsto cleanair from smoker to non-smokers.The main obstacle to society benefiting from such a proposal would be the high cost of enforcing a smoking permits system.In addition,the cost of the permit raises the effective price of the cigarettes and the resulting affect on quantity smoked will depend on the elasticity of demand 三、Calculation:(每题20分，共40分) a.Suppose both firms have entered the industry.What is the joint profit-maximizinglevel ofoutput?How much will each firm produce?How If the market,and they ollude,they will face a marginl revenue cuve with twice the slope of the demand curve: MR=50.10Q ower than that of Firm 2)to determine the profit-maximizing quantity, 50·10Q=10,0rQ=4. Substituting =4 into the demand function to determine price: P=50-5*4=$30. The question now is how the firms will divide the total output of 4 among themselves Since the two firms have different cost functions,it will not be optimal for them to split the output evenly between them.The profit maximizing solution is for firm 1 to produce all of the output so that the profitfor Firm 1 will be: 1=(0④(20+(104)=s60emissions fee. Requiring a smoking permit is similar to a system of emissions permits, assuming that the permits would not be transferable. The individual smoker in all of these programs is being forced to internalize the externality of “second -hand” smoke and will be worse off. Society will be better off if the benefits of a particular proposal outweigh the cost of implementing that proposal. Unfortunately, the benefits of reducing second-hand smoke are uncertain, and assessing those benefits is costly. a. A bill is proposed that would lower tar and nicotine levels in all cigarettes. The smoker will most likely try to maintain a constant level of consumption of nicotine, and will increase his or her consumption of cigarettes. Society may not benefit from this plan if the total amount of tar and nicotine released into the air is the same. b. A tax is levied on each pack of cigarettes sold. Smokers might turn to cigars, pipes, or might start rolling their own cigarettes. The extent of the effect of a tax on cigarette consumption depends on the elasticity of demand for cigarettes. Again, it is questionable whether society will benefit. c. Smokers would be required to carry government issued smoking permits at all times. Smoking permits would effectively transfer property rights to clean air from smokers to non-smokers. The main obstacle to society benefiting from such a proposal would be the high cost of enforcing a smoking permits system. In addition, the cost of the permit raises the effective price of the cigarettes and the resulting affect on quantity smoked will depend on the elasticity of demand. 三、Calculation：（每题 20 分，共 40 分） 1. Consider two firms facing the demand curve P = 50 - 5Q, where Q = Q1 + Q2 . The firms’ cost functions are C1 (Q1 ) = 20 + 10Q1 and C2 (Q2 ) = 10 + 12Q2 . a.Suppose both firms have entered the industry. What is the joint profit-maximizing level of output? How much will each firm produce? How would your answer change if the firms have not yet entered the industry? If both firms enter the market, and they collude, they will face a marginal revenue curve with twice the slope of the demand curve: MR = 50 - 10Q. Setting marginal revenue equal to marginal cost (the marginal cost of Firm 1, since it is lower than that of Firm 2) to determine the profit-maximizing quantity, Q: 50 - 10Q = 10, or Q = 4. Substituting Q = 4 into the demand function to determine price: P = 50 – 5*4 = $30. The question now is how the firms will divide the total output of 4 among themselves. Since the two firms have different cost functions, it will not be optimal for them to split the output evenly between them. The profit maximizing solution is for firm 1 to produce all of the output so that the profit for Firm 1 will be: 1 = (30)(4) - (20 + (10)(4)) = $60