If instead an emission permit system was established

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Reference no: EM13771419

In the absence of regulation, firm 1 would emit 15 and firm 2 would emit 20. The firms have the following marginal control costs where q1 and q2 are the amount of emissions reduced by each firm.

MC1=0.4q1

MC2=0.5q2

The EPA has determined that emissions should be reduced by 9. What tax level would achieve this goal? How much abatement would be done by each firm?

If instead an emission permit system was established, how much would each firm spend on permits if 26 emission allowances were auctioned off? How much would they spend in total?

If the 26 permits were split evenly between the 2 firms, how much would each firm ultimately spend? How much would they spend in total?

Reference no: EM13771419

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