. Question 14 Suppose that there are two firms creating 160 units of pollution. Suppose that the government wants to reduce pollution by 128 units, so it gives each firm 16 permits. In addition, the costs of reducing the pollution by each firm are reported in the table below. Firm Initial Pollution Level |Cost of Reducing Pollution A 80 units $500 B 80 units $400 1. Suppose that pollution permits are NOT tradable. What is the cost of reducing the pollution? 2. Suppose that pollution permits are tradable. Which firm will be most likely selling the permits? O Firm B. O Firm A. O Firms will not engage in the trade of permits. 3. Suppose that pollution permits are tradable. Which firm will most likely be buying the permits? O Firms will not engage in the trade of permits. O Firm A. O Firm B. Chapter 14-17.doc Chapter 4 Gove....pptx Lecture 22.pptx 20 DII F1 F2 F3 E4 F6 F7 F8 # % & 3 5 6 7 8mylearning.suny.edu/d21/le/content/88958/viewConte 4. Suppose that pollution permits are tradable. What is the lowest price at which the pollution permits could be traded? 5. Suppose that pollution permits are tradable. What is the highest price at which the pollution permits could be traded? 6. Suppose that pollution permits are tradable at the price of 450. What is the cost of reducing the pollution to firm A? 7. Suppose that pollution permits are tradable at the price of 450. What is the cost of reducing the pollution to firm B? 8 Suppose that pollution permits are tradable at the price of 450. What is the total cost of reducing the pollution? 9. Compare the costs of reducing pollution with non-tradable pollution permits with tradable pollution permits. The cost with tradable pollution permits is higher O the same. O lower Chapter 14-17.doc Chapter 4 Gove....pptx Lecture 22.pptx MacBook All 20 Q F1 F2 F3 F4 F 5 F6 F7 F8 @ $ % &X" D2L Midterm Exam 2 - 22FA PRINC mylearning.suny.edu/d21/le/content/88958/viewContent/12210311/View O higher O the same. O lower 10. Suppose that the government uses command-and-control regulation and requires each firm to reduce pollution by 16 units. What is the total cost of reducing the pollution? 11. Compare the costs of reducing pollution with non-tradable pollution permits with command- and-control regulation. The cost with non-tradable pollution permits is O the same. O higher O lower 12. Compare the costs of reducing pollution with tradable pollution permits with command-and- control regulation. The cost with tradable pollution permits is O higher O the same. O lower Calculator Chapter 14-17.doc Chapter 4 Gove....Ppix Lecture 22.ppix F1 80 F2 Q F3 F4 5 DI F6 F7