Consider five different production choices 1. Q1 2 14,622: 10 2. Q1 2 10,622: 14 3. Q1 = 16,622 = 20 4. Q1 2 20,Q2 = 16 5. Q1 2 20,622 = 20 For each of the five production choices above answer the following 1. Will Firm 2 sell to Firm 1 or will Firm 1 sell to Firm 2? 2. How many permits will be sold? 3. What will be the permit price? 4. How much will each firm choose to abate? 5. What will be the profit of each firm? 5 Summary Fill in the following table. What quantities will the two firms choose under capandtrade. Why does a capandtrade policy result in more total output, more total abatement, and more total profit than an emission cap policy? | rI H Senario No Regulation {:3 99 Emission Cap Cap and Trade Cap and Trade 10 Cap and Trade 16 Cap and Trade 20 Cap and Trade 20 D Q? 14 030% O