j. Suppose the government instead wanted to impose a cap-and-trade system on this lake, with pollution permits

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j. Suppose the government instead wanted to impose a cap-and-trade system on this lake, with pollution permits that allow a producer to produce the amount of pollution necessary to produce one unit of output. What is the “cap” on pollution permits the government would want to impose to achieve the efficient outcome? What would be the rental rate of such a permit when it is traded?

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