Eco 100

Question Completion Status: MCB MCA Dollars per unit P. (5 (2 (6) 3 Q2 Qo Q1 Pollution Abatement FIGURE 17-8 Refer to Figure 17-8. Suppose a system of tradable pollution permits is introduced into this market and the equilibrium permit price is p*. We can expect that Firm B will sell permits to Firm A, pollute more, and reduce its costs by the area 1; Firm A will buy permits from Firm B, pollute less, and increase its earnings by area 4. Firm B will sell permits to Firm A, pollute less, and reduce its costs by the area 1; Firm A will buy permits from Firm B, pollute more, and increase its costs by the area 4. Firm B will buy permits from Firm A, pollute less, and increase its costs by the areas 2 + 3; Firm A will sell permits to Firm B, pollute more, and reduce its earnings by areas 4 + 5. Firm B will buy permits from Firm A, pollute more, and reduce its costs by the area 1; Firm A will sell permits to Firm B, pollute less, and increase its earnings by area 5