Question: can someone help me with this question Question 2 [30 points]. The abatement cost functions for two air pollutant sources are given by 61(a) =
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Question 2 [30 points]. The abatement cost functions for two air pollutant sources are given by 61(a) = gai and 62012) = gag, where :11 and a2 denote abatement by source 1 and 2, respectively. With no control, each rm would emit 1000 units of the pollutant of = 83 = 1000, with the businessas-usual total emission given by e0 = of + 82 = 2000. (2a) [15 points] The govermnent has decided to cut the total emission from 2000 units to 800 units, and to implement this goal through a tradable pemiit system It issues 400 permits to each rm, with one permit allowing emission of one unit. Determine the equilibrium permit price, permit trading pattern (which rm buys and which rm sells permits), and the abatement and net emission of each rm after permit trading. Calculate the total cost of each rm (including the total abatement costs and net permit expenditure). (2b) [15 points] Suppose instead that the government issues permits based on historical emissions. Firm one, having a higher cost of abatement, has been emitting more in the past than rm two. The govermnent nally decides to issue 600 permits to rm one and 200 permits to rm two. Detemiine the equilibrium permit price, pemiit trading pattern (which rm buys and which rm sells permits), and the abatement and net emission of each rm after permit trading. Calculate the total cost of each rm (including the total abatement costs and net permit expenditure). Comparing your answers with (2a), what can you conclude about the initial distribution of permits
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