---The first government employee suggests limiting pollution through regulation. To meet the pollution goal, the government requires each firm to reduce its pollution by 2 units.**Complete the following table with the total cost to each firm of reducing its pollution by 2 units.**| Firm | Total Cost of Eliminating Two Units of Pollution ||-------|--------------------------------------------------|| | (Dollars) || Firm X| || Firm Y| || Firm Z| |**Method 2: Tradable Permits**Meanwhile, the other employee proposes using a different strategy to achieve the government's goal of reducing pollution in the area from 12 units to 6 units. This employee suggests that the government issue two pollution permits to each firm. For each permit a firm has in its possession, it can emit 1 unit of pollution. Firms are free to trade pollution permits with one another (that is, buy and sell permits) as long as both firms can agree on a price.For example, if firm X agrees to sell a permit to firm Y at an agreed-upon price, then firm Y would end up with three permits and would need to reduce its pollution by only 1 unit while firm X would end up with only one permit and would have to reduce its pollution by 3 units. Assume the negotiation and exchange of permits are costless.Because firm Y has high pollution-reduction costs, it thinks it might be better off buying a permit from firm X and a permit from firm Z so that it...---(Note: This transcription includes the visible parts of the text. Portions of the text cut off at the end of the image were left incomplete.) ### Reducing Pollution: Policy Options and Economic ImpactsSuppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating four units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce the total pollution in the area to 6 units, it can choose between the following two methods:#### Available Methods to Reduce Pollution:1. **The Government Sets Pollution Standards Using Regulation:** This method involves setting limits on the amount of pollution each firm can emit.2. **The Government Allocates Tradable Pollution Permits:** Under this system, the government issues a limited number of pollution permits, which firms can trade among themselves.Each firm faces different costs, so reducing pollution is more difficult for some firms than others. The following table shows the cost each firm faces to eliminate each unit of pollution. For each firm, assume that the cost of reducing pollution to zero (that is, eliminating all 4 units of pollution) is prohibitively expensive.##### Cost of Eliminating Pollution by Firm| **Firm** | **First Unit of Pollution**(_Dollars_) | **Second Unit of Pollution**(_Dollars_) | **Third Unit of Pollution**(_Dollars_) ||-----------|------------------------------------------|--------------------------------------------|--------------------------------------------|| **Firm X** | 80 | 100 | 150 || **Firm Y** | 450 | 800 | 1,050 || **Firm Z** | 95 | 120 | 200 |**Explanation of the Table:**- Each row corresponds to one of the three firms (Firm X, Firm Y, Firm Z).- Each column shows the cost, in dollars, for that firm to eliminate a specific unit of pollution.- The costs increase for each successive unit of pollution eliminated, reflecting the increasing difficulty and expense of reducing pollution further.Now, imagine that two government employees proposed alternative plans for reducing pollution by 6 units.### Explanation of IdeasIn practice, these methods impact firms differently depending on the cost structure of reducing pollution. Policymakers need to consider the economic implications of each method to ensure both environmental goals and economic efficiency.---*Note: This educational content provides insights into the economic challenges and policy considerations regarding pollution control, helping learners understand how different regulatory methods affect firms with varying cost

An externality refers to the cost or the benefits that is caused by the suppliers or producers that…

The first government employee suggests limiting pollution through regulation. To meet the pollution goal, the government requires each firm to reduce its pollution by 2 units. Complete the following table with the total cost to each firm of reducing its pollution by 2 units. Total Cost of Eliminating Two Units of Pollution Firm (Dollars) Firm X Firm Y Firm Z

The first government employee suggests limiting pollution through regulation. To meet the pollution goal, the government requires each firm to reduce its pollution by 2 units. Complete the following table with the total cost to each firm of reducing its pollution by 2 units. Total Cost of Eliminating Two Units of Pollution Firm (Dollars) Firm X Firm Y Firm Z

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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