There are three industrial firms in Happy Valley. Initial Pollution Cost of Reducing Firm Level Pollution by 1 Unit A 30 units $20 40 units $30 C 20 units $10 The government wants to reduce pollution to 60 uni so it gives each firm 20 tradable pollution permits. a. Who sells permits and how many do they sell? Who buys permits and how many do they buy? Briefly explain why the sellers and buyers are ea willing to do so. What is the total cost of pollutic reduction in this situation -. How much higher would the costs of pollution reduction be if the permits could not be traded?

There are three industrial firms in Happy Valley. Initial Pollution Cost of Reducing Firm Level Pollution by 1 Unit A 30 units $20 40 units $30 C 20 units $10 The government wants to reduce pollution to 60 uni so it gives each firm 20 tradable pollution permits. a. Who sells permits and how many do they sell? Who buys permits and how many do they buy? Briefly explain why the sellers and buyers are ea willing to do so. What is the total cost of pollutic reduction in this situation -. How much higher would the costs of pollution reduction be if the permits could not be traded?

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 10PA

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Question

9. There are three industrial firms in Happy Valley.
Initial Pollution
Cost of Reducing
Firm
Level
Pollution by 1 Unit
A
30 units
$20
B
40 units
$30
C
20 units
$10
The government wants to reduce pollution to 60 units,
so it gives each firm 20 tradable pollution permits.
a. Who sells permits and how many do they sell?
Who buys permits and how many do they buy?
Briefly explain why the sellers and buyers are each
willing to do so. What is the total cost of pollution
reduction in this situation
b. How much higher would the costs of pollution
reduction be if the permits could not be traded?
nswers

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