Regulation Versus Tradable PermitsDetermine the total cost of eliminating six units of pollution using both methods, and enter the amounts in the following table. (Hint: You might needto get information from previous tasks to complete this table.)Total Cost of Eliminating Six Units of Pollution(Dollars)Proposed MethodRegulationTradable PermitsIn this case, you can conclude that eliminating pollution isregulates each firm to eliminate a certain amount of pollution.costly to society when the government distributes tradable permits than when it Suppose a municipality votes to reduce the combined pollution introduced by three local companies. Presently, each firm creates 4 units of pollution inthe area, for a total of 12 pollution units. The government can reduce total pollution in the area to 6 units by choosing between the following twomethods:Methods to Reduce Pollution1. The government imposes pollution standards using regulation.2. The government issues tradable pollution permits.The costs faced by each firm are different, so it is more difficult for some firms to reduce pollution than others. The following table shows the costfaced by each firm to eliminate each unit of pollution. Assume that the cost of eliminating all 4 units of pollution (that is, reducing pollution to zero) isprohibitively expensive for all three firms.FirmFirm AFirm BFirm CFirst Unit of Pollution(Dollars)8055075Cost of Eliminating the...Second Unit of Pollution Third Unit of Pollution(Dollars)2101,075130(Dollars)13070090Next, suppose that two government officials proposed alternative plans that would reduce pollution by 6 units.

Two methods of pollution control measures are taken into consideration :1) Government regulation2)…

Regulation Versus Tradable Permits Determine the total cost of eliminating six units of pollution using both methods, and enter the amounts in the following table. (Hint: You might need to get information from previous tasks to complete this table.) Total Cost of Eliminating Six Units of Pollution (Dollars) Proposed Method Regulation Tradable Permits In this case, you can conclude that eliminating pollution is ▼costly to society when the government distributes tradable permits than when it regulates each firm to eliminate a certain amount of pollution.

Regulation Versus Tradable Permits Determine the total cost of eliminating six units of pollution using both methods, and enter the amounts in the following table. (Hint: You might need to get information from previous tasks to complete this table.) Total Cost of Eliminating Six Units of Pollution (Dollars) Proposed Method Regulation Tradable Permits In this case, you can conclude that eliminating pollution is ▼costly to society when the government distributes tradable permits than when it regulates each firm to eliminate a certain amount of pollution.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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There is another entire part of this lesson. Complete the following table with the action each firm will take at this permit price, the amount of pollution each firm will eliminate, and the amount it costs each firm to reduce pollution to the necessary level. If a firm is willing to buy two permits, assume that it buys one permit from each of the other firms. (Hint: Do not include the prices paid for permits in the cost of reducing pollution.) Firm Initial Pollution Permit Allocation Action Final Amount of Pollution Eliminated Cost of Pollution Reduction (Units of pollution) (Units of pollution) (Dollars) Firm A 2 Firm B 2 Firm C 2
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