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Please explain thoroughly Currently there are three major green house gas produers in the city: A, B, and C. A produces 50 units, B produces
Please explain thoroughly
Currently there are three major green house gas produers in the city: A, B, and C. A produces 50 units, B produces 35 units and C produces 25 units. Each firm can reduce emissions, but the technolgy is costly. It would cost A $20 to reduce emissions by one unit, it would cost B $35 to reduce emeissions by one unit, and it would cost C $50 to reduce emissions by one unit. Government has determined that socially acceptable level of pollution is 75 units but the government has no information on firm's emission mitigation costs. It allocated 25 emission permits to eachforms (75 in total) and let them trade permits any way they want. Assuming there is no gvernment corruption and no transaction cost in trading emissions, what will be the market price per unit of emission and what will be the levels of emmisons at all three firms? Assuming the government does not interfere in the market of emission permits, will the market equilibrium be socially efficientStep by Step Solution
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