Author Question: The above figure shows the marginal benefit from pollution for two firms. If each firm receives a ... (Read 221 times)

ghost!

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The above figure shows the marginal benefit from pollution for two firms. If each firm receives a marketable permit to produce 25 units of pollution, which one of the following is most likely to happen?
◦ Firm B will sell some pollution rights to firm A.
◦ Firm A will produce all 50 units of pollution.
◦ Firm A will sell some pollution rights to firm B.
◦ Both firms will produce 25 units of pollution.


dreamfighter72

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Firm B will sell some pollution rights to firm A.



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pane00

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The above figure shows the marginal benefit from pollution for two firms. If both firms receive a marketable permit to pollute 25 units of pollution each, how much will each firm pollute and how much will a permit for one unit of pollution be worth?



trog

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Firm B will sell permits to firm A until the marginal benefits are the same for both firms. Firm A will generate 37 tons of pollution and firm B will generate 13 tons of pollution. The market value of a permit will be $5.



 

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