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 uni 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 ea willing to do so. What is the total cost of pollutic reduction in this situation -. How much higher would the costs of pollution reduction be if the permits could not be traded?

Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter10: Externalities
Section: Chapter Questions
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9. There are three industrial firms in Happy Valley.
Initial Pollution
Cost of Reducing
Firm
Level
Pollution by 1 Unit
A
30 units
$20
B
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?
nswers
Transcribed Image Text:9. There are three industrial firms in Happy Valley. Initial Pollution Cost of Reducing Firm Level Pollution by 1 Unit A 30 units $20 B 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? nswers
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