Costs of Regulation

Essay

Costs of Regulation. The Appalachian Coal Company sells coal to electric utilities in the southeast. Unfortunately, Appalachian's coal has high particulate content and, therefore, the company is adversely affected by state and local regulations governing smoke and dust emissions at its customer's electricity-generating plants. Appalachian's total cost and marginal cost relations are:
where Q is tons of coal produced per month and TC includes a normal rate of return on investment.