Chapter 6

Page 180

In the first paragraph on the RHS of page 180, there is a statement that the total cost of abatement if firm A were to undertake all 40 units of abatement would be 2500. One reader (Dr Leon de Graaf) has alerted me to the fact that the correct value is actually 2600. This difference of 100 comes from the property that each of the two firms in the example, A and B, has fixed abatement costs of 100. The value of 2500 is obtained by assuming that if all abatement is done by A then B need not undertake any abatement activity, and so could avoid the fixed costs of 100.

This is a position that is difficult to maintain, particularly as a statement about the short run. Therefore, it seems more appropriate to treat the total abatemnt cost as being 2600 rather than 2500. (In fact, the value of 2600 is found in the excel file "Leastcost.xls" by entering values of 40 and 0 in the formula at the top of Sheet 1.

This is an interesting matter, and alerts one of the need to be more careful than I have of the way that fixed costs are handled.

Page 200

In the first new paragraph on page 200, a formula is given for the firm's net loss in the case of an emissions tax. Currently, the text states that the magnitude of this loss corresponds to the asum aof the areas labelled as S3+S4+S5+S6-S2 in Figure 6.6. That statment is incorrect, as the minus sign in front of the last terms should be a plus sign. Thus the correct formula is

S3+S4+S5+S6+S2  

(so adding and not substracting S2).

Many thanks to Nicole A. Mathys for bringing this error to my attention.