There are three industrial firms in Happy Valley. The government wants to reduce pollution to 60 units,

Question:

There are three industrial firms in Happy Valley.

Cost of Reducing Pollution by 1 Unit Initial Pollution Firm Level ..30 units. 40 units.. .$20 A... $30 B..... 20 units.

The government wants to reduce pollution to 60 units, so it gives each firm 20 tradable pollution permits.

a. Who sells permits and how many do they sell? Who buys permits and how many do they buy? Briefly explain why the sellers and buyers are each willing to do so. What is the total cost of pollution reduction in this situation?

b. How much higher would the costs of pollution reduction be if the permits could not be traded?

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Principles of Economics

ISBN: 978-1305585126

8th edition

Authors: N. Gregory Mankiw

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Question Posted: Aug 04, 2017 09:43 AM

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There are three industrial firms in Happy Valley. The government wants to reduce pollution to 60 units,

Question:

Cost of Reducing Pollution by 1 Unit Initial Pollution Firm Level ..30 units. 40 units.. .$20 A... $30 B..... 20 units. C..... .$10

Step by Step Answer:

a The firms with the highest cost of reducing pollution will buy permits rather than reduce their po...View the full answer

Principles of Economics

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