California is considering a new carbon cap-and-trade policy. The marginal benefits of abatement and the marginal abatement costs of pollution producing industries are:

Q18 California is considering a new carbon cap-and-trade policy. The marginal benefits of abatement and the marginal abatement costs of pollution producing industries are: MB = 100 - Q 8 MAC = Q (9 1. Suppose there are 100 tons of carbon emissions uniformly produced in California each year. What level should the cap be set at to reach efficiency? What price will permits trade at? By how much will emissions be reduced? Display graphically. 2. Suppose instead, the California sets the cap too high at 60 tons. How will this impact the equi- librium found above? In other words, what is the value of the resulting dead weight loss? Display graphically. 3. What are some of benefits of a permit scheme