There are three industrial firms in Happy Valley. Initial Pollution Level Cost of Reducing Pollution by 1 Unit Firm (Units) (Dollars) A 30 20 B
There are three industrial firms in Happy Valley. Initial Pollution Level Cost of Reducing Pollution by 1 Unit Firm (Units) (Dollars) A 30 20 B 40 30 C 20 10 The government wants to reduce pollution to 60 units, so it gives each firm 20 tradable pollution permits. Because firm % has the highest cost of reducing pollution by 1 unit, it would like to W another firm. Because firm W has the lowest cost of reducing pollution by 1 unit, it is willing to W the firm with the highest cost. Complete the second column of the following table by indicating who buys and sells permits in this case. Complete the fourth column of the table with the number of permits each firm ends up with after trading with the others. Next, subtract the number of permits from the initial pollution level to determine how many units of pollution reduction each firm has to complete, and enter these values into the fifth column of the table. Next, determine the total cost of reducing the pollution levels you determined in the previous column, and enter that into the final column of the table. Finally, add up the total pollution reduction costs for each firm and enter the total amount in the final cell of the total row in the following table. Initial Remaining Cost of Reducing Total Pollution Pollution Permits Pollution Pollution by 1 Unit Reduction Cost Firm Buys or Sells Level after Trade Reduction (Dollars) (Dollars) A v 30 20 B v 40 30 C v 20 10 Total If permits could not be traded, firm A would have to remove units of pollution at a total cost of , firm B would have to remove units of pollution at a total cost of , and firm C would have to remove units of pollution at a total cost of . The overall cost of reducing pollution in this case is :} , which is W than with tradable permits
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance