The table below shows the
| Price per Pollution Permit |
Quantity of Permits |
| $4,500 | 75 |
| 4,000 | 150 |
| 3,500 | 225 |
| 3,000 | 300 |
| 2,500 | 375 |
| 2,000 | 450 |
| 1,500 | 525 |
a. If no fee for a pollution permit were charged, how many tonnes of pollutants would be discharged into the atmosphere, assuming a straight-line demand curve?
Quantity: tonnes
b. Suppose government were to set a fee of $3,500 per pollution permit. How many tonnes of pollutants would now be dumped? What is the total revenue received by government?
Quantity: tonnes
Total revenue: $
c. Suppose that a new technology allows for a significant reduction in hydrocarbons at a relatively low cost so that the demand for pollution permits in the industrial park drops by 150 tonnes. Assuming that government holds the permit fee at $3,500, how many tonnes of pollutants would now be dumped? What would be the total revenue received by government?
Quantity: tonnes
Total revenue: $
d. After the change in demand in (c), what would happen if, instead of maintaining the fee of $3,500, government wants to maintain the same level of pollutants as in (b)? What fee would it have to charge, and what would be its new revenue?
Fee: $
Total revenue: $
Step by step
Solved in 4 steps with 4 images
