The figure below shows the marginal pollution abatement costs of two companies - Alpha Electric and Beta Inc.

-Refer to the figure above. Which of the following will happen if the government allocates 200 pollution permits to each company and the price of each permit is $300?
A) Alpha Electric will want to sell 100 permits to Beta Inc.
B) Alpha Electric will want to sell all the permits to Beta Inc.
C) Alpha Electric will want to buy all the permits from Beta Inc.
D) Alpha Electric will want to buy 100 permits from Beta Inc.

Question

The figure below shows the marginal pollution abatement costs of two companies - Alpha Electric and Beta Inc.
 
-Refer to the figure above. Which of the following will happen if the government allocates 200 pollution permits to each company and the price of each permit is $300?
A) Alpha Electric will want to sell 100 permits to Beta Inc. 
B) Alpha Electric will want to sell all the permits to Beta Inc. 
C) Alpha Electric will want to buy all the permits from Beta Inc. 
D) Alpha Electric will want to buy 100 permits from Beta Inc.

Quizplus · Accepted Answer

Alpha Electric, which only needs 100 permits, will have 100 extra permits. Beta Inc., needing 300 permits, will be short 100 permits. Therefore, Alpha Electric will want to sell 100 permits to Beta Inc. to meet their respective needs.

The Figure Below Shows the Marginal Pollution Abatement Costs of Two