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Demand for permits 2 Supply of permits Quantity of permits Use the graph of the market for discharge permits above, with the following values, p1 = $23 p2 = $31 q1 = 42,000 q; = 31,000 In addition, suppose there are 1,000 polluting rms with identical abatement costs in this market, so that for each rm: corresponding to MAC = $23, desired permits would be q1 = 42; and, corresponding to MAC = $31, desired permits would be q; = 31 Now, answer these questions: a. If 42,000 permits are issued by the regulatory authority, and an individual rm has MAC = $31, will that rm buy additional permits, sell excess permits, or make no change? Explain, and if the rm will buy or sell, indicate the quantity bought or sold. b. If instead the regulatory authority reduces the number of permits to 31,000, and we are dealing with the same individual rm with MAC = $31, what will that rm do now? Explain, and if the rm will buy or sell, indicate the quantity bought or sold. c. Suppose that the regulatory authority issues 42,000 permits but we have an individual rm with MAC = $23. Will that rm buy additional permits, sell excess permits, or make no change? Explain, and if the rm will buy or sell, indicate the quantity bought or sold. d. If instead the regulatory authority reduces the number of permits to 31,000, and we are dealing with the same individual rm with MAC = $23, what will that rm do now? Explain, and if the rm will buy or sell, indicate the quantity bought or sold