Method 2: Tradable PermitsMeanwhile, the other employee proposes using a different strategy to achieve the government's goal of reduding polution in the area from 12 units to6 units. This employee suggests that the government issue two polution permits to each firm. For each permit a firm has in its possession, it can emit1 unit of pollution. Firms are free to trade polution permits with one another (that is, buy and sell them) as long as both firms can agree on a price.For example, firm X agrees to sell a permit to firm Y at an agreed upon price, then firm Y wouid end up with three permits and would need to reduceits poliution by anly 1 unit while firm X would end up with only ane permit and would have to reduce its pollution by 3 units. Assume the negotiationand exchange of permits are costless.Because firm 2 has high polution reduction costs, it thinks it might be better off buying a permit from firm Y and a permit from firm x so that itdoesn't have to reduce its own polution emissions. At which of the following prices is firm Y willing to sell one of its permits to firm 2, but firm X isnot? Check al that apply.O st04O s170O st83O $263O s734Suppose the the government has set the trading price of a permit at $585 per permit.Complete the falowing table with the action each frm will take at this permit price, the amount of polution cach firm wil eliminate, and the amount iecosts each firm to reduce polution to the necessary ievel. Ifa firm is wiling to buy two permits, assume that it buys one permt fram cach of theocher firms. (Hint: Do not include the prices paid far permits in the cost af reducing polution.)Initial Pollution PermitFinal Amount of PollutionCost of PollutionAllocationEliminatedReductionFirm(Units of pollution)Action(Units of pollution)(Dollars)Firm XFirm Y2Firm zRegulation Versus Tradable PermitsDetermine the total cost of eliminating six units of pallution using both methods, and enter the amounts in the folowing table. (Hint: You might needto get information from previous tasks to complete this table.)Total Cost of Eliminating Six Units of PollutionProposed Method(Dolars)RegulationTradable PermitsIn this case, you can conclude that eliminating polution iscostly to society when the government distributes tradable permits than when itregulates each firm to eliminate a certain amount of pollution. Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in thearea, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following twomethods:Available Methods to Reduce Pollution1. The government sets pollution standards using regulation.2. The government allocates tradable pollution permits.Each firm faces different costs, so reducing pollution is more difficult for some firms than others. The following table shows the cost each firm faces toeliminate each unit of pollution. For each firm, assume that the cost of reducing pollution to zero (that is, eliminating all 4 units of pollution) isprohibitively expensive.Cost of Eliminating the...First Unit of PollutionSecond Unit of PollutionThird Unit of PollutionFirm(Dollars)(Dollars)(Dollars)Firm X130165220Firm Y90115140Firm z6007501,200Now, imagine that two government employees proposed alternative plans for reducing pollution by 6 units.Method 1: RegulationThe first government employee suggests limiting pollution through regulation. To meet the pollution goal, the government requires each firm to reduceits pollution by 2 units.Complete the following table with the total cost to each firm of reducing its pollution by 2 units.Total Cost of Eliminating Two Units of PollutionFirm(Dollars)Firm XFirm YFirm z

When the pollution levels in an economy exceed a certain safe limit, the government intervenes to…

Answered: eof permits are castiess. Z has high…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two methods: Available Methods to Reduce Pollution 1. The government sets pollution standards using regulation. 2. The government allocates tradable pollution permits. Each firm faces different costs, so reducing pollution is more difficult for some firms than others. The following table shows the cost each firm faces to eliminate each unit of pollution. For each firm, assume that the cost of reducing pollution to zero (that is, eliminating all 4 units of pollution) is prohibitively expensive. Firm Cost of Eliminating the... First Unit of Pollution Second Unit of Pollution Third Unit of Pollution (Dollars) (Dollars) (Dollars) Firm X 95 120 200…
Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two methods: Available Methods to Reduce Pollution 1. The government sets pollution standards using regulation. 2. The government allocates tradable pollution permits. Each firm faces different costs, so reducing pollution is more difficult for some firms than others. The following table shows the cost each firm faces to eliminate each unit of pollution. For each firm, assume that the cost of reducing pollution to zero (that is, eliminating all 4 units of pollution) is prohibitively expensive. Firm Firm X Firm Y Firm Z Method 1: Regulation Firm Firm X Firm Y Firm Z First Unit of Pollution (Dollars) 130 Now, Imagine that two government employees proposed alternative plans for reducing…
Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two methods: Available Methods to Reduce Pollution 1. The government sets pollution standards using regulation. 2. The government allocates tradable pollution permits. Each firm faces different costs, so reducing pollution is more difficult for some firms than others. The following table shows the cost each firm faces to eliminate each unit of pollution. For each firm, assume that the cost of reducing pollution to zero (that is, eliminating all 4 units of pollution) is prohibitively expensive. Firm Cost of Eliminating the... First Unit of Pollution Second Unit of Pollution Third Unit of Pollution (Dollars) (Dollars) (Dollars) Firm X 90 125 180…
Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two methods: Available Methods to Reduce Pollution 1. The government sets pollution standards using regulation. 2. The government allocates tradable pollution permits. Each firm faces different costs, so reducing pollution is more difficult for some firms than others. The following table shows the cost each firm faces to eliminate each unit of pollution. For each firm, assume that the cost of reducing pollution to zero (that is, eliminating all 4 units of pollution) is prohibitively expensive. First Unit of Pollution Cost of Eliminating the... Second Unit of Pollution (Dollars) Third Unit of Pollution (Dollars) Firm (Dollars) Firm X 80 100 150 Firm Y 450 800 1,050 Firm Z 95 120 200 Now,…
The following table shows the marginal costs for each of the four firms (A, B, C, and D) to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, it would cost $ 54, and for Firm A to eliminate a second unit of pollution it would cost an additional$67. Refer to Table 10-5. Suppose the government wants to reduce pollution from 16 units to 8 units and auctions off 8 pollution permits to achieve this goal. Which of the following is a likely auction price for the permits? a.$69b.$97c.$81d. 583
The following table shows the current level of toxic waste dumped by two firms and the marginal cost of cleaning up additional 10 lbs increments of waste. Suppose the government has imposed a pollution tax of $7 per 10 lbs of waste. Calculate the reduction in total pollution and the total cost to the firms of doing so? Current waste (lbs) Cost of reducing by 1st 10 lbs Cost of reducing by 2nd 10 lbs Cost of reducing by 3rd 10 lbs Cost of reducing by 4th 10 lbs Cost of reducing by 5th 10 lbs Firm A 60 $5 $10 $15 $20 $25 Firm B Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. 80 $2 $4 $6 $8 $10
There are three identical firms in Happy Valley. Firms Initial Pollution Level Cost of Reducing Pollution by 1 unit A 30 units $20 B 40 units $30 C 20 units $10 The government wants to reduce total pollution to 60 units, so it gives each firm 20 tradable permits. Who sells permits and how many do they sell? Who buys permits and how many do they buy? Briefly explain why the sellers and buyers are each willing to do so? What is the total cost of pollution reduction in this situation? How much larger would the cost of pollution reduction be if the permits could not be traded?
What is an externality in economics? Explain how a neighbor’s barking dog could be both a positive and a negative externality. Can pollution ever make us better off? How do we know? Should we aim to eliminate all pollution? If not, what should our goal be? Defend your answer. When thinking about types of goods, what does rivalry mean? What does excludability mean? What are the four categories of goods we can identify using those attributes, and what is an example of a good in each category?
Suppose the United States has two utilities, Commonweath Utilities and Consolidated Electric. Both produce 20 million tons of sulfur dioxide pollution per year. However, the marginal cost of reducing a ton of pollution for Commonwealth Utilities is $200 per ton and the marginal cost of reducing a ton of pollution for Consolidated Electric is $225 per ton. The government's goal is to cut sulfur dioxide pollution in half (by 20 million tons per year). If the government issues 10 million tradable pollution permits to each utility, what will be the cost of eliminating half of the pollution to society? million per year. Using a cap-and-trade system of tradable emission allowances will eliminate half of the sulfur dioxide pollution at a cost of $
The following table shows the total costs for each of four firms (A,B,C, and D) to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, it would cost $40, and for Firm A to eliminate two units it would cost a total of $105. If the government charged a tax of $74 per unit of pollution, how many units of pollution would the firms eliminate altogether? Number of units Firm A Firm B Firm C Firm D eliminated One unit 40 45 50 48 Two units 105 100 80 108 Three units 180 172 165 178 Four units 285 244 250 285 O 16 O 11 O 14 0 9 O 5
Chapter 10 The first government employee suggests reducing pollution through regulation. To meet the pollution goal, the government requires each firm reduce its pollution by 2 units. Complete the following table with the total cost to each firm of reducing its pollution by 2 units. Firm Total Cost of Eliminating Two Units of Pollution (Dollars) Firm A Firm B Firm C ☐☐ Method 2: Tradable Permits Meanwhile, the other employee proposes using a different strategy to achieve the government's goal of reducing pollution in the area from 1 6 units. This employee suggests that the government issue two pollution permits to each firm. For each permit a firm has in its possession, i 1 unit of pollution. Firms are free to trade pollution permits with one another (that is, buy and sell them) as long as both firms can agree on For example, if firm A agrees to sell a permit to firm B at an agreed-upon price, then firm B would end up with three permits and would nee reduce its pollution by only 1 unit…
The following table shows the marginal costs for each of four firms (A, B, C, and D) to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, it would cost $54, and for Firm A to eliminate a second unit of pollution it would cost an additional $67. Firm Unit to be eliminated A B C D First unit 54 57 54 62 Second unit 67 68 66 73 Third unit 82 86 82 91 Fourth unit 107 108 107 111 Refer to Table 5. If the government charged a fee of $84 per unit of pollution, how many units of pollution would the firms eliminate altogether?

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