*Topic: Environmental Economics; Economics incentives; Emission trading system.

Q.

The two companies, X and Y, that follow the cost minimization strategy, have five different production processes in producing the same amount of product. Each process discharges different amounts of pollutants. The cost per day of each process and the corresponding pollutant emissions (ton/day) are given as shown in Table 1 below. Answer next time

	A process (4 ton/ day)	B process (3 ton/ day)	C process (2 ton/ day)	D process (1 ton/ day)	E process (0 ton/ day)
X Company Total Cost	100	120	140	170	220
Y Company Total Cost	60	100	150	255	375

1. If there is no regulation on the occurrence of contamination, what process will each company use, and what is the total amount of pollutant generated at this time?

2. The local government intends to reduce the amount of pollution in half. To achieve this, local governments require companies to use emission permits issued per ton of emissions. Of course, the number of emission permits is limited to the target level of pollution. Permit is sold by auction to the highest-priced company.

If only companies X and Y are pollutants, how many permits will companies X and Y purchase each?

How much can you expect the permit to be sold for?

3. Interpret and compare the total social costs incurred by this method of auctioning permits and the total costs incurred when individual companies halve pollution emissions, respectively. Which one is socially efficient?

FYI) I'm not a native English speaker. If you are writing at notebook, Please dont write in cursive. Always your are solution is Very thankful to me