What is the range of equilibrium prices

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There are three factories in a town, all of which ermit 5 tons of pollution. They could reduce their emission but with a cost. The table bellow show the marginal abatement cost for each ton by which the firm could reduce its emission. Suppose that the government wants to reduce total emissions from15 tons to 6 tons. 

a) Suppose the government orders each firm to reduce its pollution by 3 tons, What is the total abatement cost?

b) Suppose instead that the government issues 2 pollution permits to each firm. Denote this as the pollution program. Who will buy permits and who will sell them?

c) What is the range of equilibrium prices for the permits under the pollution program? 

tons of reductions

marginal cost to

1st

2rd

3th

4th

5th

firm a

firm b 

firm c

100

200

600

300

300

700

500

400

800

700

500

900

900

600

1000

Reference no: EM133133523

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