The first government employee suggests reducing pollution through regulation. To meet the pollution goal, the govern 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 (Dollars) Firm Firm A Firm B Firm C 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 them) as long as both firms can agree on a price. For example, if firm A agrees to sell a permit to firm B at an agreed-upon price, then firm B would end up with three permits and would need to reduce its pollution by only 1 unit while firm A 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 B has high pollution-reduction costs, it thinks it might be better off buying a permit from firm A and a permit from firm C so that it doesn't have to reduce its own pollution emissions. At which of the following prices are both firm A and firm C willing to sell one of their permits to firm B? Check all that apply. $93 $171 $178 $367
The first government employee suggests reducing pollution through regulation. To meet the pollution goal, the govern 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 (Dollars) Firm Firm A Firm B Firm C 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 them) as long as both firms can agree on a price. For example, if firm A agrees to sell a permit to firm B at an agreed-upon price, then firm B would end up with three permits and would need to reduce its pollution by only 1 unit while firm A 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 B has high pollution-reduction costs, it thinks it might be better off buying a permit from firm A and a permit from firm C so that it doesn't have to reduce its own pollution emissions. At which of the following prices are both firm A and firm C willing to sell one of their permits to firm B? Check all that apply. $93 $171 $178 $367
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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