Determine the transfer coefficients

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Reference no: EM1371718

Two identical company's save money from polluting. A company's marginal savings from emitting an amount (e) are given by 10 - 2e. The two firms differ in their impact on ambient pollution concentrations. Two units of emissions from firm 1 result in one unit of ambient pollution. Firm 2 has twice the impact on the ambient environment from the same amount of emissions.

a. What are the transfer coefficients for each of the two firms?
b. If firm 1 is given 2 emission permits and firm 2 is given 4 emission permits and they are allowed to trade, how many permits will each firm end up with and what will be the price?
c. If instead each firm is given 2 ambient pollution permits and trading takes place, how much will each firm end up emitting and what will be the permit price?

Reference no: EM1371718

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