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There are three industrial firms in Happy Valley. Firm Initial Pollution Level Cost of Reducing Pollution by 1 Unit (Units) (Dollars) A 30 5 B 45 10 C 60 20   The government wants to reduce pollution by 90 units, so it gives each firm 30 tradable pollution permits. Because firm    has the highest cost of reducing pollution by 1 unit, it would like to    another firm. Because firm    has the lowest cost of reducing pollution by 1 unit, it is willing to    the firm with the highest cost.

There are three industrial firms in Happy Valley. Firm Initial Pollution Level Cost of Reducing Pollution by 1 Unit (Units) (Dollars) A 30 5 B 45 10 C 60 20   The government wants to reduce pollution by 90 units, so it gives each firm 30 tradable pollution permits. Because firm    has the highest cost of reducing pollution by 1 unit, it would like to    another firm. Because firm    has the lowest cost of reducing pollution by 1 unit, it is willing to    the firm with the highest cost.

ENGR.ECONOMIC ANALYSIS
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 are three industrial firms in Happy Valley.
Firm
Initial Pollution Level
Cost of Reducing Pollution by 1 Unit
(Units)
(Dollars)
A 30 5
B 45 10
C 60 20
 
The government wants to reduce pollution by 90 units, so it gives each firm 30 tradable pollution permits.
Because firm    has the highest cost of reducing pollution by 1 unit, it would like to    another firm. Because firm    has the lowest cost of reducing pollution by 1 unit, it is willing to    the firm with the highest cost.
**Pollution Reduction Exercise: Understanding Tradable Permits** In Happy Valley, there are three industrial firms: | Firm | Initial Pollution Level (Units) | Cost of Reducing Pollution by 1 Unit (Dollars) | |------|------------------------------|-------------------------------------------| | A | 30 | 5 | | B | 45 | 10 | | C | 60 | 20 | The government aims to reduce pollution by 90 units and allocates each firm 30 tradable pollution permits. **Instructions:** 1. **Identify Firm Behavior:** - Determine which firm has the highest cost of reducing pollution per unit and which has the lowest. - Discuss which firm might benefit from selling or buying permits based on these costs. 2. **Table Completion:** - Indicate in a new column who buys and who sells permits. - Note the number of permits each firm retains after trading. 3. **Pollution Reduction Calculation:** - Subtract the final number of permits from the initial pollution level to find how much each firm needs to reduce. - Enter these values to determine each firm's necessary pollution reduction. 4. **Cost Analysis:** - Calculate the total cost for each firm to achieve the required pollution reduction. - Sum the total pollution reduction costs for all firms. This structured activity helps understand the economic implications of environmental policy and the role of tradable permits in reducing pollution efficiently.
Transcribed Image Text:**Pollution Reduction Exercise: Understanding Tradable Permits** In Happy Valley, there are three industrial firms: | Firm | Initial Pollution Level (Units) | Cost of Reducing Pollution by 1 Unit (Dollars) | |------|------------------------------|-------------------------------------------| | A | 30 | 5 | | B | 45 | 10 | | C | 60 | 20 | The government aims to reduce pollution by 90 units and allocates each firm 30 tradable pollution permits. **Instructions:** 1. **Identify Firm Behavior:** - Determine which firm has the highest cost of reducing pollution per unit and which has the lowest. - Discuss which firm might benefit from selling or buying permits based on these costs. 2. **Table Completion:** - Indicate in a new column who buys and who sells permits. - Note the number of permits each firm retains after trading. 3. **Pollution Reduction Calculation:** - Subtract the final number of permits from the initial pollution level to find how much each firm needs to reduce. - Enter these values to determine each firm's necessary pollution reduction. 4. **Cost Analysis:** - Calculate the total cost for each firm to achieve the required pollution reduction. - Sum the total pollution reduction costs for all firms. This structured activity helps understand the economic implications of environmental policy and the role of tradable permits in reducing pollution efficiently.
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