Two firms emit pollution into a river, and have total benefits from emissions of: S =...

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Two firms emit pollution into a river, and have total benefits from emissions of: S₁ = 30q1 - 2.5q1 S2 = 3092 - 1.592 where S, is the private costs saved from not treating the emissions, and q; is the level of emissions by each firm. Suppose that the government implements a tradeable emissions permit scheme. It issues permits for total emissions of 8 and allocates half the permits to each firm. Calculate the trade in permits between the firms. What will be the permit price? Include a diagram that illustrates the trade between firms. Does the government need to know the benefits of pollution to each firm in order for the equi-marginal principal to hold? Two firms emit pollution into a river, and have total benefits from emissions of: S₁ = 30q1 - 2.5q1 S2 = 3092 - 1.592 where S, is the private costs saved from not treating the emissions, and q; is the level of emissions by each firm. Suppose that the government implements a tradeable emissions permit scheme. It issues permits for total emissions of 8 and allocates half the permits to each firm. Calculate the trade in permits between the firms. What will be the permit price? Include a diagram that illustrates the trade between firms. Does the government need to know the benefits of pollution to each firm in order for the equi-marginal principal to hold?

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The answer to your question is no the government does not need to know the benefits of pollution to ... View the full answer