Market will work exactly like that of a private good

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The EPA Administrator has decided that the equilibrium you have identified above can be achieved by creating a market and selling green house gases at the equilibrium price you have identified above. This means that this market will work exactly like that of a private good. (The reduction in green house gases is being treated like it is a private good.) Answer the following questions for this situation:

• Assume that EPA approaches group 1 first and offers to sell reductions in green house gases to this group at the equilibrium price you have identified in part 1 above. Group 1 is willing to purchase ___________ units at this price and group 2 is willing to purchase ___________ units at this price. The total reduction in green house gases for this case is ____________. How does this outcome compare with your answer above? ___________

• Assume that EPA approaches group 2 first and offers to sell reductions in green house gases to this group at the equilibrium price you have identified in part 1 above. Group 2 is willing to purchase __________ units at this price and group 1 is willing to purchase ____________ units at this price. The total reduction in green house gases in this case is _______________. House does this outcome compare with your answer above? ________.

Reference no: EM131000870

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