Complete the second column of the following table by indicating who buys and sells permits in this case. Complete the fourth column of the table withthe number of permits each firm ends up with after trading with the others. Next, subtract the number of permits from the initial pollution level todetermine how many units of pollution reduction each firm has to complete, and enter these values into the fifth column of the table. Next, determinethe total cost of reducing the pollution levels you determined in the previous column, and enter that into the final column of the table. Finally, add upthe total pollution reduction costs for each firm and enter the total amount in the final cell of the total row in the following table.FirmABCTotalBuys or SellsInitialPollutionLevel304560If permits could not be traded, firm A would have to removeunits of pollution at a total cost of $The overall cost of reducing pollution in this case is $"Permitsafter TradeRemainingPollutionReductionCost of ReducingPollution by 1 Unit(Dollars)5and firm C would have to remove, which isunits of pollution at a total cost of $1020firm B would have to removeunits of pollution at a total cost of $than with tradable permits.Total PollutionReduction Cost(Dollars)I There are three industrial firms in Happy Valley.FirmABCInitial Pollution Level Cost of Reducing Pollution by 1 Unit(Units)304560(Dollars)51020The government wants to reduce pollution to 90 units, so it gives each firm 30 tradable pollution permits.

Tradable pollution permits are allowances given to industrial firms which give them the right to…

Complete the second column of the following table by indicating who buys and sells permits in this case. Complete the fourth column of the table with the number of permits each firm ends up with after trading with the others. Next, subtract the number of permits from the initial pollution level to determine how many units of pollution reduction each firm has to complete, and enter these values into the fifth column of the table. Next, determine the total cost of reducing the pollution levels you determined in the previous column, and enter that into the final column of the table. Finally, add up the total pollution reduction costs for each firm and enter the total amount in the final cell of the total row in the following table. Firm A B с Total Buys or Sells Initial Pollution Level 30 45 60 If permits could not be traded, firm A would have to remove units of pollution at a total cost of $ The overall cost of reducing pollution in this case is $ Permits after Trade Remaining Pollution Reduction Cost of Reducing Pollution by 1 Unit (Dollars) 5 10 20 units of pollution at a total cost of $ and firm C would have to remove , which is Total Pollution Reduction Cost (Dollars) firm B would have to remove units of pollution at a total cost of $ than with tradable permits.

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 10PA