The marginal cost of reducing pollution per ton is PMCA = $400 for firm A and PM

Question

The marginal cost of reducing pollution per ton is PMCA = $400 for firm A and PMCB = $300 for firm B. Only need answers please)

20. Firm A emits 200 tons of pollution and firm B emits 150 tons of pollution. Suppose that the government issues 300 tradable permits (with one permit allowing for one ton of pollution). Firms A and B receive 200 and 100 respectively of the 300 tradable permits. Firm A will

a. sell 50 permits

b. buy 50 permits

c. sell 0 permits

d. buy 0 permits.

21. Firm A emits 200 tons of pollution and firm B emits 150 tons of pollution. Suppose that the government issues 300 tradable permits (with one permit allowing for one ton of pollution). Firms A and B receive 200 and 100 respectively of the 300 tradable permits. Firm B will need to

a. increase its current pollution level by 50 tons

b. decrease its current pollution level by 50 tons.

c. increase its current pollution level by 150 tons

d. decrease its current pollution level by 150 tons.

22. Would the annual pollution tonnage emitted by firm A (or for that matter firm B) with the tradable permit system differ from its pollution tonnage with an efficient outcome emissions fee?

a. Same tonnage.

b. Different tonnage

c. Insufficient information for a definite conclusion.

Explanation / Answer

20. there is no need to buy to firm A, because the level of emission and what they are exposing both are same. so, option D is correct

21. now firm B is emiting 150 tonns of pollution, but its limit is 100 tons only. so, it has to decrease it upto 100 tonns. so, option B is correct

22. option B is correct

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