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Sagot :
A) Current total pollution is 200 units. It must reduce pollution by 80 units.
What does "tradeable pollution permit" mean?
The term "cap and trade" refers to trading in pollution permits. They grant businesses the authority to pollute for a set period of time and in a specified amount. Then, companies that pollute less can sell their unused pollution permits to companies that pollute more. The main benefit of a system with tradable permits is that it allows for efficient exchange, allowing one potential polluter to purchase permits from another while maintaining the same level of pollution overall.
Firms with a higher cost of reducing the pollution will buy permits rather than reduce their pollution
Firms that are able to sell their permits for more than it costs to reduce their pollution will,
Here, Firm B is the most desperate and the net buyer
Firm B buys 40 units from firm C because they offer the cheapest alternative, → has 80 pp in total so doesn't reduce pollution at all
Firm C sells its 40 pp to firm B → now has 10 pp
Firm A keeps its 70 and neither buys nor sells
The total cost of pollution reduction
= [((70-40) x $20) + (80-80) x $25) + (50-10) x $10)]
= $1000
The total cost of pollution reduction
= [((70-40) x $20) + (80-40) x $25) + (50-40) x $10)]
= $1700
Pollution reduction would cost $1000 if the permits couldn't be traded
To learn more about trading in pollution permits, visit:
https://brainly.com/question/23800617
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The correct question is:
"There are three industrial firms in Happy ValleyInitial Pollution level:
Firm A: 70 units | B: 80 units | C: 50 units
Cost of Reducing Pollution by 1 Unit
Firm A $10 | B: $25 | C: $10
The government wants to reduce pollution to 120 units, so it gives each firm 40 tradable pollution permits 120 40
a. Who sells the permits and how many do they sell?
Who buys permits and how many do they buy?
What is the total cost of pollution reduction?
b. How much higher would the costs of pollution reduction be if the permits could not be traded?"
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