. Draw a graph with pollution abatement on the horizontal axis (assume a firm can remove up to 100...

 

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. Draw a graph with pollution abatement on the horizontal axis (assume a firm can remove up to 100 tons of pollution) and dollars ($) on the vertical axis. Draw one firm's marginal abatement cost curve (MC). Consider two possible policies to reduce pollution: a standard versus a tradable permit solution. Assume the standard program would require the firm to reduce to 30 tons of pollution; assume the permit system would issue the firm 70 permits (each allowing 1 ton of pollution). Draw a situation in which the price of permits induces the firm to sell some permits. b. What is the cost-savings in this case as compared to the standard policy? c. On your graph, indicate the price permits would need to be to make the firm indifferent between the two policies. . Draw a graph with pollution abatement on the horizontal axis (assume a firm can remove up to 100 tons of pollution) and dollars ($) on the vertical axis. Draw one firm's marginal abatement cost curve (MC). Consider two possible policies to reduce pollution: a standard versus a tradable permit solution. Assume the standard program would require the firm to reduce to 30 tons of pollution; assume the permit system would issue the firm 70 permits (each allowing 1 ton of pollution). Draw a situation in which the price of permits induces the firm to sell some permits. b. What is the cost-savings in this case as compared to the standard policy? c. On your graph, indicate the price permits would need to be to make the firm indifferent between the two policies.

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Part a Standard policy Under a standard policy the firm would be required to reduce pollution to 30 tons This would require the firm to abate 70 tons of pollution which would cost the firm the amount View the full answer