Assume there are two types of polluting fırms in California and they currently each release 50 units of pollution. Half of the firms have a marginal cost of pollution reduction equal to: MC = 2X (Type 1). The other half have a marginal cost of pollution reduction equal to: MC = 20 (Type 2). *X denotes the quantity of units reduced. If the government implemented a system of tradable permits and gave each firm 25 tradable pollution permits (25 permits allows them to pollute 25 units), what is the optimal allocation of permits to minimize the cost of pollution reduction? O Type 2 would sell 10 permits to Type 1 O Type 2 would sell 5 permits to Type 1 O Type 1 would sell 5 permits to Type 2 O Type 2 would sell 15 permits to Type 1 O Type 1 would sell 10 permits to Type 2 O Type 1 would sell 15 permits to Type 2

Assume there are two types of polluting fırms in California and they currently each release 50 units of pollution. Half of the firms have a marginal cost of pollution reduction equal to: MC = 2X (Type 1). The other half have a marginal cost of pollution reduction equal to: MC = 20 (Type 2). *X denotes the quantity of units reduced. If the government implemented a system of tradable permits and gave each firm 25 tradable pollution permits (25 permits allows them to pollute 25 units), what is the optimal allocation of permits to minimize the cost of pollution reduction? O Type 2 would sell 10 permits to Type 1 O Type 2 would sell 5 permits to Type 1 O Type 1 would sell 5 permits to Type 2 O Type 2 would sell 15 permits to Type 1 O Type 1 would sell 10 permits to Type 2 O Type 1 would sell 15 permits to Type 2

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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