Now assume that Super Polluter faces competition with the entrant of a new firm, Reducing our Footprint, Inc. The two fırms together split the market and totalproduction, so now they are together emitting 80 tons of carbon dioxide (40 tons each).The EPA sets a goal to reduce these emissions by 40 tons, so they issue pollution permits for the remaining 40 tons only (20 to each firm). The costs of pollutionreduction for both firms are shown in the graph below.Pollution ReductionCosts per UnitMCRSP$1,000MCRROE$400$300AВROF 0510152025303540SP 40353025201510Units of Pollution Reduced• What does it cost Super Polluter (SP) to reduce emissions this time? How about Reducing our Footprint (ROF)?• Assuming the pollution permits are tradable, and the cost of a permit settles at $400, how much will Super Polluter and Reducing our Footprint each reduce theirpollution?• Including permit costs/income, what will it cost them?• How much does each firm save relative to the costs calculated at the beginning of this question?

Introduction: The Environmental Protection Agency (EPA) was based on President Richard Nixon's…

Now assume that Super Polluter faces competition with the entrant of a new firm, Reducing our Footprint, Inc. The two firms together split the market and total roduction, so now they are together emitting 80 tons of carbon dioxide (40 tons each). he EPA sets a goal to reduce these emissions by 40 tons, so they issue pollution permits for the remaining 40 tons only (20 to each firm). The costs of pollution eduction for both fırms are shown in the graph below. Pollution Reduction Costs per Unit MCRSP $1,000 MCRROE $400 $300 A В ROF O 5 10 15 20 25 30 35 40 SP 40 35 30 25 20 15 10 5 Units of Pollution Reduced

Now assume that Super Polluter faces competition with the entrant of a new firm, Reducing our Footprint, Inc. The two firms together split the market and total roduction, so now they are together emitting 80 tons of carbon dioxide (40 tons each). he EPA sets a goal to reduce these emissions by 40 tons, so they issue pollution permits for the remaining 40 tons only (20 to each firm). The costs of pollution eduction for both fırms are shown in the graph below. Pollution Reduction Costs per Unit MCRSP $1,000 MCRROE $400 $300 A В ROF O 5 10 15 20 25 30 35 40 SP 40 35 30 25 20 15 10 5 Units of Pollution Reduced

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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