Suppose that two firms emit a certain pollutant. The marginal cost of reducing pollution for each firm is as follows: MC₁ = 300e and MC₂ = 100e2, where e and 2 are the amounts (in tons) of emissions reduced by the first and second firms, respectively. Assume that in the absence of government intervention, each firm generates 80 tons of emissions. Suppose that the regulator introduces a tradable permit system and issues 80 permits, each of which allows the emission of one ton of pollution, and each firm receives 40 permits. By how many tons does firm 1 end up reducing its pollution? Answer: 80

Suppose that two firms emit a certain pollutant. The marginal cost of reducing pollution for each firm is as follows: MC₁ = 300e and MC₂ = 100e2, where e and 2 are the amounts (in tons) of emissions reduced by the first and second firms, respectively. Assume that in the absence of government intervention, each firm generates 80 tons of emissions. Suppose that the regulator introduces a tradable permit system and issues 80 permits, each of which allows the emission of one ton of pollution, and each firm receives 40 permits. By how many tons does firm 1 end up reducing its pollution? Answer: 80

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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