ECNS 202 PRINTOUT
ECNS 202 PRINTOUT
8th Edition
ISBN: 9781337096584
Author: Mankiw
Publisher: CENGAGE L
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Chapter 9, Problem 5CQQ
To determine

The policy which hurts consumers and helps producers and increases trade.

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Suppose that each firm pollutes 100 units and is given 70 pollution permits (i.e., each firm must reduce pollution by 30 units if they do not trade their permits). If firms are allowed to trade their permits, then the equilibrium price of permits will be and permits. and as a result of being able to trade their OA. $10; firm A buys 20 permits from firm B profits fall by $200 for A and rise by $200 for B OB. $10; firm A buys 20 permits from firm B profits rise by $40 for A and rise by $40 for B OC. $12; firm A sells 10 permits to firm B; profits rise by $40 for A and rise by $40 for B OD. $12, firm A buys 10 permits from firm B profits fall by $120 for A and rise by $120 for B E. None of the above Marginal Abatement Cost ($) 18 16- 4 12- 10- 8- MCA 0 10 20 30 40 50 60 70 80 Pollution Abatement 90 -6°C Mostly clear Next M 40
Consider an economy in which there are two polluters: A and B. The marginal cost of pollution abatement curves are given in the diagram to the right. The total cost of reducing pollution by 60 units if it is done efficiently or $ equals $ if it is done by forcing each firm to reduce pollution by 30 units. OA. 925; 1125 OB. 900; 1100 OC. 850, 1050 OD. 800, 1000 OE. None of the above The efficient levels of pollution reduction can be achieved by using a pollution tax equal to $ unit A. 25 0 per MC 45 40 35 30- 25 20- 15 10- 5- Marginal Abatement Cost ($) 10 20 30 40 50 60 70 80 Pollution Abatement -6°C Mostly clear Next 90
is initially abating Q units of pollution. Suppose that a system of tradeable pollution permits is introduced into this market and the equilibrium permit price is P* Firm B will sell permits to Firm A because OA. Firm A has lower costs of pollution abatement than Firm B. OB. Firm B's total cost of abating more pollution (area 1) is less than the revenue it earns from selling the permits (areas 5+3). OC. Firm B's total cost of abating more pollution (areas 3+1) is less than the revenue it earns from selling the permits (areas 5+3+1). OD. Firm B can buy the permits at a lower price than Firm A OE. the revenue Firm B earns from selling permits (areas 3+1) is greater than the cost it incurs from abating more pollution (area 1). Dollars per unit Q₁ Qo Q2 Pollution Abatement ил Next -6°C Mostly clear MCA MCB
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