Friday
September 19, 2014

Homework Help: Economics

Posted by Anonymous on Monday, October 25, 2010 at 9:22pm.

There are three industrial firms in Happy Vally.

Initial Cost of Reducing

Firm Pollution Level Pollution by 1 unit


A 70 units $20

B 80 units $25

C 50 units $10


The government wants to reduce pollution to 120 units, so it gives each firm 40 tradable pollution permits. Basically the government is allowing each firm to pollute up to 40 units and must remove the pollution for another over 40 units. By allowing the firm to trade (buy and sell) these permits to other firms in the industry, the firm can chose to sell its permits rather than use them.


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? Show all calculations. (Hint: Each firm would be willing to sell permits if they can get more than the price of removing the pollution and each firm would be willing to buy permits if they could get them for less that the cost of removing the pollution.)

b. How much higher would the costs of pollution reduction be in the permits could not be traded? Show all calculations.

Answer this Question

First Name:
School Subject:
Answer:

Related Questions

Economics - There are three industrial firms in Happy Vally. Initial Cost of ...
Microeconomics - Correcting for negative externalities - Regulation versus ...
Econ - Suppose the government wants to reduce the total pollution emitted by ...
managerial economics - Appalachian Coal Mining believes that it can increase ...
Economics - Appalachian Coal Mining believes that it can increase labor ...
managerial economics - Appalachian Coal Mining believes that it can increase ...
Econ MC - Two firms, A and B, each currently dump 50 tons of chemicals into the ...
Marginal Analysis - Applacian Coal Mine Co believes it can increase labor ...
Economics - a firm in a purely competitive industry is currently producing a ...
economics - The graph on the left shows the short-run marginal cost curve for a ...

Search
Members