What market price of permits would incentivize the firm

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Reference no: EM133456270

Questions:

Assuming the firm is given 7 permits to pollute by the regulator, what market price of permits would incentivize the firm to not buy or sell any permits?

Assume the firm is given 7 permits to pollute by the regulator. If the market price for permits is $8, does this firm buy or sell permits? How many?

Calculate the extra profit (or cost savings) the firm receives from participating in the permit market given their initial allocation of permits (7) and the market price of $8. Show your work.

Shade and label the area on the graph that represents your numerical answer from the question above.

Going back to the firms initial allocation of permits (7), what happens if the market price for permits is $1? Does this firm buy or sell permits? How many?

Calculate the extra profit (or cost savings) the firm receives from participating in the permit market given their initial allocation of permits (7) and the market price of $1. Show your work.

Shade the area on the graph that represents your numerical answer from the previous question.

Reference no: EM133456270

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