Tradeable Permits Instructions General Background You represent an electrical power company in an industry with ten companies in total. Each company is currently producing 500 tons of sulfur dioxide per year as a side product in their production of electricity (5,000 tons total in the industry). Because sulfur dioxide causes acid rain, the federal government has decided to reduce the total amount of sulfur dioxide your industry produces by 40% (3,000 tons total in the industry). One way to reduce this pollution would be to require each company to cut sulfur dioxide emissions to 300 tons/year. However, economists have suggested that a system of tradable permits would be a cheaper way to get the same total amount of reduction. Under this regime, each firm must own one pollution permit for each 100 tons of sulfur dioxide it emits. The Environmental Protection Agency representative auctions off a total of 30 permits, which would allow 3,000 tons total of emissions, just enough so that total industry emissions will be 40% less than the current level