Suppose the United States has two utilities, Commonweath Utilities and Consolidated Electric. Both produce 20 million tons of sulfur dioxide pollution per year. However, the marginal cost of reducing a ton of pollution for Commonwealth Utilities is $200 per ton and the marginal cost of reducing a ton of pollution for Consolidated Electric is $225 per ton. The government's goal is to cut sulfur dioxide pollution in half (by 20 million tons per year). If the government issues 10 million tradable pollution permits to each utility, what will be the cost of eliminating half of the pollution to society? Using a cap-and-trade system of tradable emission allowances will eliminate half of the sulfur dioxide pollution at a cost of $ million per year.
Suppose the United States has two utilities, Commonweath Utilities and Consolidated Electric. Both produce 20 million tons of sulfur dioxide pollution per year. However, the marginal cost of reducing a ton of pollution for Commonwealth Utilities is $200 per ton and the marginal cost of reducing a ton of pollution for Consolidated Electric is $225 per ton. The government's goal is to cut sulfur dioxide pollution in half (by 20 million tons per year). If the government issues 10 million tradable pollution permits to each utility, what will be the cost of eliminating half of the pollution to society? Using a cap-and-trade system of tradable emission allowances will eliminate half of the sulfur dioxide pollution at a cost of $ million per year.
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter10: Externalities
Section: Chapter Questions
Problem 10PA
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Transcribed Image Text:Suppose the United States has two utilities, Commonweath Utilities and Consolidated Electric. Both produce 20 million tons of sulfur dioxide pollution per year. However, the marginal cost of
reducing a ton of pollution for Commonwealth Utilities is $200 per ton and the marginal cost of reducing a ton of pollution for Consolidated Electric is $225 per ton. The government's goal is to cut
sulfur dioxide pollution in half (by 20 million tons per year).
If the government issues 10 million tradable pollution permits to each utility, what will be the cost of eliminating half of the pollution to society?
million per year.
Using a cap-and-trade system of tradable emission allowances will eliminate half of the sulfur dioxide pollution at a cost of $
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