Using the tables above, 1) If the government issues 10 permits to Firm A and 10
ID: 1191005 • Letter: U
Question
Using the tables above,
1) If the government issues 10 permits to Firm A and 10 permits to Firm B, what is the total cost of compliance (WITHOUT TRADE)?
2) Assume the government issues 10 permits to Firm A and 10 permits to Firm B and allows trading.
After trading, how many units of pollution will Firm A abate?
3)Assume the government issues 10 permits to Firm A, 10 Permits to Firm B, and allows trade.
What is the total cost of compliance after trading takes place (not including the cost of permits bought and sold)?
4)Using the same tables above,
Assume the government issues 10 permits to Firm A, 10 permits to Firm B, and allows trade.
How many permits will be traded?
5)Using the tables above, assume the government issues 10 permits to Firm A and 10 to Firm B.
If the firms are allowed to trade permits, what will the range of prices be for the first permit traded?
If no permits will be traded, record the answer 0.
Otherwise, record your answer as [low price, high price]. For example, if the price is between $2 and $3, record [2, 3].
6)Using the tables above, assume the government issues 10 permits to Firm A and 10 to Firm B.
If the firms are allowed to trade permits, what will the range of prices be for the second permit traded?
If less than two permits will be traded, record the answer 0.
Otherwise, record your answer as [low price, high price]. For example, if the price is between $2 and $3, record [2, 3].
7) If the polluting firm is given the property right, how many units will be produced without bargaining (what is the market equilibrium before bargaining takes place)?
*NOTE: Do not assume these are straight lines. To calculate areas, add all relevant small triangles and rectangles.
8) Using the graph above,
If the polluting firm is given the property right, what is the value of Total Damages before bargaining takes place?
Report your answer with 1 decimal place. Ex: if total damages are equal to $3, submit 3.0
9)Using the graph above and assuming the polluting firm is given the property right,
If bargaining can take place, what is the range of prices that could lead to an optimal level of production and pollution?
10)Using the graph above and assuming the property right assigned is one for the right to no pollution.
If bargaining can take place, what is the range of prices that could lead to an optimal level of production and pollution?
Submit your answer as follows: if the range of prices is between $2 and $3, submit [2.0, 3.0]
Explanation / Answer
Please post multiple questions. According to guidelines, I'm answering the first question.
1) 10 permits to Firm A means that Firm A can pollute only 10 units and it will have to abate 10 units.
Total cost of abating 10 units = Sum of MC of abatement till 10 units of firm a = 1+2+3+..+10 = $55
Similarly for Firm B = Sum of MC of abatement till 10 units of firm a = 2+4+6+8+10+12+14+15+18+21+24=$120
Total cost of compliance = $55+$120 = $175
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