Business
Business, 06.04.2021 04:10, khynia11

Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two methods: Available Methods to Reduce Pollution
1. The government sets pollution standards using regulation.
2. The government allocates tradable pollution permits.
Each firm faces different costs, so reducing pollution is more difficult for some firms than others. The following table shows the cost each firm faces to eliminate each unit of pollution. For each firm, assume that the cost of reducing pollution to zero (that is, eliminating all 4 units of pollution) is prohibitively expensive.
Firm Cost of Eliminating the...
First Unit of Pollution Second Unit of Pollution Third Unit of Pollution
(Dollars) (Dollars) (Dollars)
Firm X 130 165 220
Firm Y 600 750 1,200
Firm Z 90 115 140
Now, imagine that two government employees proposed alternative plans for reducing pollution by 6 units.
Method 1: Regulation
The first government employee suggests to limit pollution through regulation. To meet the pollution goal, the government requires each firm to reduce its pollution by 2 units. Complete the following table with the total cost to each firm of reducing its pollution by 2 units.
Firm Total Cost of Eliminating Two Units of Pollution
(Dollars)
Firm X
Firm Y
Firm Z
Method 2: Tradable Permits
Meanwhile, the other employee proposes using a different strategy to achieve the government?s goal of reducing pollution in the area from 12 units to 6 units. He suggests that the government issues two pollution permits to each firm. For each permit a firm has in its possession, it can emit 1 unit of pollution. Firms are free to trade pollution permits with one another (that is, buy and sell them) as long as both firms can agree on a price. For example, if firm X agrees to sell a permit to firm Y at an agreed-upon price, then firm Y would end up with three permits and would need to reduce its pollution by only 1 unit while firm X would end up with only one permit and would have to reduce its pollution by 3 units. Assume the negotiation and exchange of permits are costless.
Because firm Y has high pollution-reduction costs, it thinks it might be better off buying a permit from firm Z and a permit from firm X so that it doesn't have to reduce its own pollution emissions. At which of the following prices are both firm Z and firm X willing to sell one of their permits to firm Y?
a. $127.
b. $199.
c. $207.
d. $244.
e. $345.
Suppose the the government has set the trading price of a permit at $523 per permit.
Complete the following table with the action each firm will take at this permit price, the amount of pollution each firm will eliminate, and the amount it costs each firm to reduce pollution to the necessary level. If a firm is willing to buy two permits, assume that it buys one permit from each of the other firms.
Firm Initial Pollution Action Final Amount of Cost of Pollution
Permit Allocation Pollution Eliminated Reduction
(Units of pollution) (Units of pollution) (Dollars)

Firm X 2
Firm Y 2
Firm Z 2
Regulation Versus Tradable Permits
Determine the total cost of eliminating six units of pollution using both methods, and enter the amounts in the following table.
Proposed Method Total Cost of Eliminating Six Units of Pollution
(Dollars)
Regulation
Tradable Permits
In this case, you can conclude that eliminating pollution is less/more? Costly to society when the government regulates each firm to eliminate a certain amount of pollution than when it allocates pollution permits that can be bought and sold.

answer
Answers: 2

Other questions on the subject: Business

image
Business, 21.06.2019 18:00, rb276
Sara bought 12 3/4 cakes sara's friends ate 3/8 how much cake is left
Answers: 1
image
Business, 22.06.2019 06:30, dee3874
If the findings and the results are not presented properly, the research completed was a waste of time and money. true false
Answers: 1
image
Business, 22.06.2019 10:30, tigistamare03
6carla would like to buy a dress, a dresser for her bedroom, and a home theater system. she has one month's worth of living expenses in her emergency fund. carla decides to save for the home theater system. did carla make the right decision? why or why not? a. yes; her emergency fund is full and the other items will probably be less expensive. b. yes; she could save more for her emergency fund, but the home theater will be harder to save for. c. no; she should save more for her emergency fund because she has saved less than the recommended amount. d. no; she should have bought the dress and dresser first because she could afford them right away. reset next
Answers: 2
image
Business, 22.06.2019 14:30, crystalryan3797
What’s the present value of a perpetuity that pays $250 per year if the appropriate interest rate is 5%? $4,750 $5,000 $5,250 $5,513 $5,788what is the present value of the following cash flow stream at a rate of 8.0%, rounded to the nearest dollar? cash flows: today (t = 0) it is $750, after one year (t = 1) it is $2,450, at t = 2 it is $3,175, and at t=3 it is $4,400. draw a time line. $7,917 $8,333 $8,772 $9,233 $9,695
Answers: 2
Do you know the correct answer?
Suppose the government wants to reduce the total pollution emitted by three local firms. Currently,...

Questions in other subjects: