11. Suppose there are 2 types of firms which emit some uniformly-mixed pollution. We'll assume that they are all in different industries and that there are many individual firms. This usually gives the best opportunity for a smoothly functioning market for permits to develop. There are older, not very profitable firms and newer, more profitable firms. The old firms have many long-term employees and have a lot of political clout. The older firms could probably cause a big enough stir to quash any regulatory scheme that cost them money. The new firms have a lot less political clout. Initial Emissions Older Firms $5 100 Newer Firms $3 200 MAC Number of Firmst 40 30 I a. Describe what would happen if a permit scheme was implemented whereby each firm was allocated (given) permits equal to 40% of its initial emissions. b. Design a permit scheme that would not cost the older firms anything, but would still reduce emissions by 60% overall.

11. Suppose there are 2 types of firms which emit some uniformly-mixed pollution. We'll assume that they are all in different industries and that there are many individual firms. This usually gives the best opportunity for a smoothly functioning market for permits to develop. There are older, not very profitable firms and newer, more profitable firms. The old firms have many long-term employees and have a lot of political clout. The older firms could probably cause a big enough stir to quash any regulatory scheme that cost them money. The new firms have a lot less political clout. Initial Emissions Older Firms $5 100 Newer Firms $3 200 MAC Number of Firmst 40 30 I a. Describe what would happen if a permit scheme was implemented whereby each firm was allocated (given) permits equal to 40% of its initial emissions. b. Design a permit scheme that would not cost the older firms anything, but would still reduce emissions by 60% overall.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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