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p1= $23p2= $31q1= 42,000q2= 31,000 In addition, suppose there are 1,000 polluting firms with identical abatement costs in this market, so that for each firm:

p1= $23p2= $31q1= 42,000q2= 31,000

In addition, suppose there are 1,000 polluting firms with identical abatement costs in this market, so that for each firm:

corresponding to MAC= $23, desired permits would beq1= 42;and, corresponding to MAC= $31, desired permits would be q2= 31

a. If 42,000 permits are issued by the regulatory authority, and an individual firm has MAC = $31, will that firm buy additional permits, sell excess permits, or make no change?Explain, and if the firm will buy or sell, indicate the quantity bought or sold.

b. If instead the regulatory authority reduces the number of permits to 31,000, and we are dealing with the same individual firm with MAC = $31, what will that firm do now?Explain, and if the firm will buy or sell, indicate the quantity bought or sold.

c. Suppose that the regulatory authority issues 42,000 permits but we have an individual firm with MAC = $23.Will that firm buy additional permits, sell excess permits, or make no change?Explain, and if the firm will buy or sell, indicate the quantity bought or sold.

d. If instead the regulatory authority reduces the number of permits to 31,000, and we are dealing with the same individual firm with MAC = $23, what will that firm do now?Explain, and if the firm will buy or sell, indicate the quantity bought or sold.

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