THE TABLE IS BELOW IS NEEDED FOR THE QUESTIONS 17. If Squirrel Township issued 3
ID: 1165318 • Letter: T
Question
THE TABLE IS BELOW IS NEEDED FOR THE QUESTIONS
17. If Squirrel Township issued 300 pollution permits to each firm in December 2017 and the market price for each pollution permit is $105 in 2018, Small will
a. buy 0 permits
b. buy 50 permits
c. sell 10 permits
d. sell 60 permits.
18. If Squirrel Township issued 300 pollution permits to each firm in December 2017 and the market price for each pollution permit is $105 in 2018, Medium will
a. buy 10 permits
b. buy 50 permits
c. sell 25 permits
d. sell 50 permits.
19. If Squirrel Township issued 300 pollution permits to each firm in December 2017 and the market price for each pollution permit is $105 in 2018, Big will
a. reduce its 2017 pollution level by 200 tonnes
b. increase its 2017 pollution level by 225 tonnes
c. reduce its 2017 pollution level by 225 tonnes
d. maintain its 2017 pollution level.
20. If Squirrel Township issued 300 pollution permits to each firm in December 2017 and the market price for each pollution permit is $105 in 2018, Medium will
a. reduce its 2017 pollution level by 100 tonnes
b. increase its 2017 pollution level by 125 tonnes
c. reduce its 2017 pollution level by 75 tonnes
d. maintain its 2017 pollution level.
21. Is a tradable pollution permit policy a cost-effective method of reducing pollution?
a. Yes
b. No.
22. With the 900 tradable pollution permits in 2018, the total cost ($) of reducing pollution from 1200 in 2017 to 900 tonnes in 2018 will be
a. $10,000
b. 12,000
c. 13,875
d. 27,750.
23. With a command-and-control pollution reduction policy (where each firm cuts back its pollution level by 100 tonnes in 2018), the total cost ($) of reducing pollution from 1200 in 2017 to 900 tonnes in 2018 will be
a. $21,000
b. 26,000
c. 31,000
Explanation / Answer
17> b. buy 50 permits
Small must buy as he has a higher marginal cost of abatement.
18> c
The medium must sell as marginal abatement cost is lower.
19>d. maintain its 2017 pollution level.
Big will trade his permits and keep the same pollution level.
20> d. maintain its 2017 pollution level.
The same reason as above.
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