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Microeconomics A Contemporary Intro

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter17: Externalities And The Environment

Section: Chapter Questions

Problem 5QFR

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Question

There are 2 firms: Firm X and Firm Y.
Firm X has the following cost to pollution reduction: MCx = 10 + 2Qx
Firm Y has the following cost to pollution reduction: MCy = 4 + 4Qy
Both firms currently produce 100 units of pollution, for a combined production of 200 units.
The government has decided to reduce total pollution to 56 units. To do this, the
government introduces 56 tradable permits, giving 28 to each firm. What is the equilibrium
price of each permit?

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