Consider a polluting firm with marginal savings curve MS given in the diagram below. The industry...

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Consider a polluting firm with marginal savings curve MS₁ given in the diagram below. The industry is regulated in a cap-and-trade scheme and the price of a permit currently is $100. In its current situation, the firm neither buys nor sells any permits. There is a new technology available that if it were adopted by this particular firm, it would shift its marginal savings curve to MS₂. 300 MS, 200 a. (4 marks) Does this firm have an incentive to adopt the new technology? If yes, how much? (Copy the diagram above onto your paper, and explain with the use of your diagram). b. (2) Does this firm have a bigger incentive to adopt the new technology than if it were regulated under a command-and-control regulation? Explain with the use of your diagram. c. (4 marks) As more firms in the industry adopt the new technology, what would you expect to happen in the permit market? Does this imply a stronger or weaker incentive for new firms to adopt the technology? Consider a polluting firm with marginal savings curve MS₁ given in the diagram below. The industry is regulated in a cap-and-trade scheme and the price of a permit currently is $100. In its current situation, the firm neither buys nor sells any permits. There is a new technology available that if it were adopted by this particular firm, it would shift its marginal savings curve to MS₂. 300 MS, 200 a. (4 marks) Does this firm have an incentive to adopt the new technology? If yes, how much? (Copy the diagram above onto your paper, and explain with the use of your diagram). b. (2) Does this firm have a bigger incentive to adopt the new technology than if it were regulated under a command-and-control regulation? Explain with the use of your diagram. c. (4 marks) As more firms in the industry adopt the new technology, what would you expect to happen in the permit market? Does this imply a stronger or weaker incentive for new firms to adopt the technology?

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ANS 37 a Aut 300 200 100 Price ANS 3 b AMS Exit new technolo... View the full answer