A) The total abatement is maximised under the cap and trade equilibrium. B) In the cap and trade equilibrium, Firm B’s gains from trade is (P* – P A) x (E X – E*/2)/2. C) Under the 50:50 split, Firm A’s total cost of abatement is given by PA x E*/2. D) Under cap and trade, Firm B pays Firm A an amount P* x (E X – E*/2), where E X is the abatement of Firm A after trade.
A) The total abatement is maximised under the cap and trade equilibrium. B) In the cap and trade equilibrium, Firm B’s gains from trade is (P* – P A) x (E X – E*/2)/2. C) Under the 50:50 split, Firm A’s total cost of abatement is given by PA x E*/2. D) Under cap and trade, Firm B pays Firm A an amount P* x (E X – E*/2), where E X is the abatement of Firm A after trade.
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter14: Environmental Economics
Section: Chapter Questions
Problem 14SQP
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Question
A) The total abatement is maximised under the cap and trade equilibrium.
B) In the cap and trade equilibrium, Firm B’s gains from trade is (P* – P A) x (E X – E*/2)/2.
C) Under the 50:50 split, Firm A’s total cost of abatement is given by PA x E*/2.
D) Under cap and trade, Firm B pays Firm A an amount P* x (E X – E*/2), where E X is the abatement of Firm A after trade.
![The figure shows the two outcomes of abatement using CO2 permits: the
50:50 split and the cap and trade equilibrium. The total amount of abatement is
E*. Based on this information, which of the following statements is correct?
50-50 initial
split of permits
Split after trading
MPCA, Firm B
Abatement by B
Abatement by A
MPCA, Firm A
Total abatement required, E*
(e.g. units of CO, abated)
Abatement costs, Firm A ($)
Abatement costs, Firm B ($)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcb7db1b6-7751-4ff5-99c4-ab869acd2c86%2F02819f3d-e1f3-49c7-8ea3-3b33c6a7de29%2Fp3fbrde_processed.png&w=3840&q=75)
Transcribed Image Text:The figure shows the two outcomes of abatement using CO2 permits: the
50:50 split and the cap and trade equilibrium. The total amount of abatement is
E*. Based on this information, which of the following statements is correct?
50-50 initial
split of permits
Split after trading
MPCA, Firm B
Abatement by B
Abatement by A
MPCA, Firm A
Total abatement required, E*
(e.g. units of CO, abated)
Abatement costs, Firm A ($)
Abatement costs, Firm B ($)
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