Question: Imagine a firm with a marginal abatement cost (MAC) function equal to: MAC = 12 - 2E. The government introduces a cap-and-trade policy and grandfathers

Imagine a firm with a marginal abatement cost (MAC) function equal to:

MAC = 12 - 2E.

The government introduces a cap-and-trade policy and grandfathers the firm 3 permits initially.Assuming the market price of permits is $4, the profit-maximizing firm will spend a total of $___ in order to buy permits.

(Note: your answer can be positive or negative; if it is positive, the firmbuyspermits and your answer represents the firm's total expenditures on permits; if it is negative, the firmsellspermits and your answer represents the firm's total revenues from selling permits).

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