#9 tradable perma. Does it matter for economic efficiency whether thegovernment distributes or auctions the permits?Why or why not?b. If the government chooses to distribute thepermits, does the allocation of permits amongfirms matter for efficiency? Explain.9. There are three industrial firms in Happy Valley.Initial PollutionCost of ReducingFirmLevelPollution by 1 UnitA30 units$2040 units$30C20 units$10The 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 eachwilling to do so. What is the total cost of pollutionreduction in this situation?b. How much higher would the costs of pollutionreduction be if the permits could not be traded?

9A) Firm Buys or Sells Initial Pollution Level permits after Trade Remaining Pollution…

Answered: a. Who sells permits and how many do…

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 ea willing to do so. What is the total cost of polluti Lhie

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter12: Environmental Protection And Negative Externalities

Section: Chapter Questions

Problem 13SCQ: A country called Sherwood is very heavily covered with a forest of 50,000 trees. There are proposals...

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Question

tradable perm
a. Does it matter for economic efficiency whether the
government distributes or auctions the permits?
Why or why not?
b. If the government chooses to distribute the
permits, does the allocation of permits among
firms matter for efficiency? Explain.
9. There are three industrial firms in Happy Valley.
Initial Pollution
Cost of Reducing
Firm
Level
Pollution by 1 Unit
A
30 units
$20
40 units
$30
C
20 units
$10
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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