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Another approach is the market based approach, where the government can set up markets and provide tradable pollution permits. Assume the government provides 500 permits
Another approach is the market based approach, where the government can set up markets and provide tradable pollution permits. Assume the government provides 500 permits to each company, allowing each company to pollute up to 500 gallons. The companies can decide to trade the permits if they choose to do so. Write down: 1.) a feasible trade that can happen between two companies (i.e., who sells? At what price?) 2.) using your numbers from part (1), how much would it cost each company to get right with the law? 3.) using your numbers from part (2) and the command-and-control prices, do the producers save any money (in terms of cleaning up? If so, how much?)
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