Suppose that after taking your economics course you visit Cleanville and hear about the city council's solution to reducing the trash. You think to yourself, "Haven't these people learned some basic economics and the Coase theorem?" You gather some data, crunch some numbers, and go to the next city council meeting. You tell them that they should give each firm three permits. Each permit allows the firm to emit 5 pounds per year. Each firm can therefore emit 15 pounds per year, which means they would have to reduce the amount of trash they emit by 25 pounds. One of the council members raises his hand and asks, "But that's what our proposal does. How is yours any different?" You answer, "What makes my proposal different is that we allow the forms to buy or sell these permits." The city council is amazed at your insight and comments how much you learned in your econ class. They realize that after your proposal has been put into place, the total cost of getting rid of the 50 pounds of trash will fall to $ the lowest total cost possible See Hint Part 3 (1 point) Let's see how the drop in total costs will come about. Filth Inc. and Sludge Inc, each start with three permits. If a firm does not buya permit or sell one of its permits, it would need to reduce trash by 25 pounds. If it sells a permit, it would have to get rid of more trash, and if it buys a permit, it would have to get rid of less. Filth Inc's marginal costs Sludge Inc's marginal costs Pounds reduced (in $1,000s) (in $1,000s) 5 7 10 4 10 15 13 2 6 SUBMIT ANSWER WIE POMLETEN (11 > Suppose that after taking your economics course you visit Cleanville and hear about the city council's solution to reducing the trash. You think to yourself, "Haven't these people learned some basic economics and the Coase theorem?" You gather some data, crunch some numbers, and go to the next city council meeting. You tell them that they should give each firm three permits. Each permit allows the firm to emit 5 pounds per year. Each firm can therefore emit 15 pounds per year, which means they would have to reduce the amount of trash they emit by 25 pounds. One of the council members raises his hand and asks, "But that's what our proposal does. How is yours any different?" You answer, "What makes my proposal different is that we allow the forms to buy or sell these permits." The city council is amazed at your insight and comments how much you learned in your econ class. They realize that after your proposal has been put into place, the total cost of getting rid of the 50 pounds of trash will fall to $ the lowest total cost possible See Hint Part 3 (1 point) Let's see how the drop in total costs will come about. Filth Inc. and Sludge Inc, each start with three permits. If a firm does not buya permit or sell one of its permits, it would need to reduce trash by 25 pounds. If it sells a permit, it would have to get rid of more trash, and if it buys a permit, it would have to get rid of less. Filth Inc's marginal costs Sludge Inc's marginal costs Pounds reduced (in $1,000s) (in $1,000s) 5 7 10 4 10 15 13 2 6 SUBMIT ANSWER WIE POMLETEN (11 >
