- Refer to Table 28.1.Suppose the government allows these two firms to trade pollution permits.What would be the price of a permit to emit the second ton of pollutants?

Question

Quizplus · Accepted Answer

The price of a permit to emit the second ton of pollutants would be determined by the marginal cost of reducing pollution for the firms. Since the firms are trading permits, the price will be set at a level where the marginal cost of reducing pollution is equal for both firms. This typically falls between the higher marginal costs of reducing pollution, which in this case is between $280 and $400.