The first si questions reter to the following scenario, in which right now 3 companies emit 4 tons each of an air pollutant, for a total of 12 tons. On the quiz you will see the following table with marginal costs for each firm to decrease their pollution: Decreasing pollution Firm A Firm B Firm C from 4 to 3 tons from 3 to 2 tons from 2 to 1 tons 10 15 20 from I to O tons 30 Assume that economists have calculated that the health and visibility effects from this pollution costs society $11 per ton, or in other words that decreasing each ton of the pollutant has a social marginal benefit of $1 1 to society (but no benefits to the firms themselves). 1. An easy question first: Leaving this market to itself without government regulation, by how much would each firm decrease its pollution? By 2. First policy: The goverment orders all three firms to decrease pollution by 1 tons each. What is the total cost of decreasing pollution to the three firms combined? 3. Second policy: the government implements a tax of $5.10 per ton a finn still emits. How much will the three firms combined decrease their pollution? 4. Third policy: the government implements a tax of $10.10 per ton a firm still emits. How much will the three firms combined decrease their pollution? 3. Fourth policy: the government auctions off permits for each ton still emitted. Which price range for the permits will result in exactly & permits being demanded? 6. Fifth policy: assume the government hands out firms A, B and C two permits each for free, but these permits can be traded after they are handed out. Of course, for each permit a firm sells it has to decrease its pollution by one more ton, but if a firm buys an additional permit then it does not have to decrease its pollution by one ton. What will most likely happen in the market for permits? 7. Why is decreasing pollution a public good? Question & refers to the scenario in Concept Check 14.2 in the book. Graphs (b) and (c) show the individual demand curves of the only two consumers of a certain good. (Graph (a) shows the aggregate/total demand curve for this good. 8. Which statement is correct? Question 9 refers to the scenario in Concept Check 14.1 in the book. 9. Which of the following goods is a rival good