Marginal cost of abatement is for the firm

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Reference no: EM139547

Q. Consider two firms, each of which is issued three marketable pollution permits. For Firm H, the marginal cost of abatement is $190. For firm L, the marginal cost of abatement is $130.

Is there room for a mutually beneficial exchange of one permit, if so which firm will buy a permit.

Is the two firms spilt the difference, Illustrate what's the price of a permit?

Assume that after the exchange of one permit, the marginal cost of abatement is for the firm that sold the permit for $170 also the marginal cost of the firm that bought the permit is $150. Will the firms exchange another permit? Also Illustrate what is the savings in abatement cost from allowing firms to buy also sell a permit.

Reference no: EM139547

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