5. Ch. 10 Problems and Applications Q9 There are three industrial firms in Happy Valley. Initial Pollution Level Cost of Reducing Pollution by 1 Unit Firm (Units) (Dollars) A 50 40 B 25 20 C 40 30 The government wants to reduce pollution to 75 units, so it gives each firm 25 tradable pollution permits. Because firm has the highest cost of reducing pollution by 1 unit, it would like to has the lowest cost of reducing pollution by 1 unit, it is willing to another firm. Because firm the firm with the highest cost. Complete the second column of the following table by indicating who buys and sells permits in this case. Complete the fourth column of the table with the number of permits each firm ends up with after trading with the others. Next, subtract the number of permits from the initial pollution level to determine how many units of pollution reduction each firm has to complete, and enter these values into the fifth column of the table. Next, determine the total cost of reducing the pollution levels you determined in the previous column, and enter that into the final column of the table. Finally, add up the total pollution reduction costs for each firm and enter the total amount in the final cell of the total row in the following table. Firm Buys or Sells Initial Pollution Level Permits after Trade Remaining Pollution Reduction A 50 B 25 C 40 Total Cost of Reducing Pollution by 1 Unit (Dollars) 40 20 30 Total Pollution Reduction Cost (Dollars) If permits could not be traded, firm A would have to remove units of pollution at a total cost of $ units of pollution at a total cost of $ firm B would have to remove ' and firm C would have to remove units of pollution at a total cost of $ The overall cost of reducing pollution in this case is $ which is than with tradable permits.
5. Ch. 10 Problems and Applications Q9 There are three industrial firms in Happy Valley. Initial Pollution Level Cost of Reducing Pollution by 1 Unit Firm (Units) (Dollars) A 50 40 B 25 20 C 40 30 The government wants to reduce pollution to 75 units, so it gives each firm 25 tradable pollution permits. Because firm has the highest cost of reducing pollution by 1 unit, it would like to has the lowest cost of reducing pollution by 1 unit, it is willing to another firm. Because firm the firm with the highest cost. Complete the second column of the following table by indicating who buys and sells permits in this case. Complete the fourth column of the table with the number of permits each firm ends up with after trading with the others. Next, subtract the number of permits from the initial pollution level to determine how many units of pollution reduction each firm has to complete, and enter these values into the fifth column of the table. Next, determine the total cost of reducing the pollution levels you determined in the previous column, and enter that into the final column of the table. Finally, add up the total pollution reduction costs for each firm and enter the total amount in the final cell of the total row in the following table. Firm Buys or Sells Initial Pollution Level Permits after Trade Remaining Pollution Reduction A 50 B 25 C 40 Total Cost of Reducing Pollution by 1 Unit (Dollars) 40 20 30 Total Pollution Reduction Cost (Dollars) If permits could not be traded, firm A would have to remove units of pollution at a total cost of $ units of pollution at a total cost of $ firm B would have to remove ' and firm C would have to remove units of pollution at a total cost of $ The overall cost of reducing pollution in this case is $ which is than with tradable permits.
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:5. Ch. 10 Problems and Applications Q9
There are three industrial firms in Happy Valley.
Initial Pollution Level
Cost of Reducing Pollution by 1 Unit
Firm
(Units)
(Dollars)
A
50
40
B
25
20
C
40
30
The government wants to reduce pollution to 75 units, so it gives each firm 25 tradable pollution permits.
Because firm has the highest cost of reducing pollution by 1 unit, it would like to
has the lowest cost of reducing pollution by 1 unit, it is willing to
another firm. Because firm
the firm with the highest cost.
Complete the second column of the following table by indicating who buys and sells permits in this case. Complete the fourth column of the table with
the number of permits each firm ends up with after trading with the others. Next, subtract the number of permits from the initial pollution level to
determine how many units of pollution reduction each firm has to complete, and enter these values into the fifth column of the table. Next, determine
the total cost of reducing the pollution levels you determined in the previous column, and enter that into the final column of the table. Finally, add up
the total pollution reduction costs for each firm and enter the total amount in the final cell of the total row in the following table.
Firm
Buys or Sells
Initial
Pollution
Level
Permits
after Trade
Remaining
Pollution
Reduction
A
50
B
25
C
40
Total
Cost of Reducing
Pollution by 1 Unit
(Dollars)
40
20
30
Total Pollution
Reduction Cost
(Dollars)
If permits could not be traded, firm A would have to remove
units of pollution at a total cost of $
units of pollution at a total cost of $
firm B would have to remove
'
and firm C would have to remove
units of pollution at a total cost of $
The overall cost of reducing pollution in this case is $
which is
than with tradable permits.
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