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The following table describes the TOTAL cost from polluting: Firm 0 units pollution 1 unit pollution 2 units pollution 3 units pollution 4 units pollution
The following table describes the TOTAL cost from polluting:
Firm
0 units pollution
1 unit pollution
2 units pollution
3 units pollution
4 units pollution
A
160
80
30
10
0
B
185
120
60
25
0
C
160
90
45
20
0
a) The government decides to sell SIX pollution permits. What do you expect the price to be for the 6thpermit?
b) The government gives firms A and B 3 permits each (but none to Firm C). What will they do with their permits?
Show all the work. Explain how price of the 6th permit is calculated. If there is a trade, what is the price range and between which firms?
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