Problem 3: Tradable Permits There are three major ferry lines operating on the East River, each generating 100 units of pollution per year. The ferry lines face the costs of reducing pollution that are shown in the table below. Cost of reducing pollution by Ferry line A 1 unit $1,500 $2,500 $1,800 B C The government has decided it wants to reduce pollution levels by 50 percent and requires each ferry line to cut its pollution in half.
Problem 3: Tradable Permits There are three major ferry lines operating on the East River, each generating 100 units of pollution per year. The ferry lines face the costs of reducing pollution that are shown in the table below. Cost of reducing pollution by Ferry line A 1 unit $1,500 $2,500 $1,800 B C The government has decided it wants to reduce pollution levels by 50 percent and requires each ferry line to cut its pollution in half.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Answer question on image attached as well as part of questions typed below:
b. The system of tradable permits results in (lower,same, higher) pollution as compared to the quota.
c. It leads to a ( higher,lower,same ) total cost of pollution reduction and thus is efficient, inefficient,indeterminate than the quota alone.
Transcribed Image Text:Problem 3: Tradable Permits
There are three major ferry lines operating on the East River, each generating 100 units of
pollution per year. The ferry lines face the costs of reducing pollution that are shown in the
table below.
Cost of reducing pollution by
1 unit
$1,500
$2,500
$1,800
Ferry line
A
В
The government has decided it wants to reduce pollution levels by 50 percent and requires
each ferry line to cut its pollution in half.
Transcribed Image Text:What is the total cost of pollution reduction under the tradable permits system?
Number of Permits
Total cost of pollution reduction (not including
Ferry Line
(after trade)
cost of permits)
A
В
C
The total cost of pollution reduction is $
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