ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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There are three industrial firms in Happy Valley.
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 arid 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

Cost of Reducing
Pollution by 1 Unit
Initial Pollution
Firm
Level
30 units
40 units
20 units
$20
$30
$10
A
C
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Transcribed Image Text:Cost of Reducing Pollution by 1 Unit Initial Pollution Firm Level 30 units 40 units 20 units $20 $30 $10 A C
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