Reduction in Emissions MC to Reduce Emissions MC to Reduce Emissions

in tons by Steel Plant by Paper Plant

1 $ 400 $ 200

2 500 280

3 600 320

Table 28.1 Refer to Table 28.1.Suppose the government allows these two firms to trade pollution permits.The most efficient transaction would result in

Question

Reduction in Emissions	MC to Reduce Emissions	MC to Reduce Emissions
in tons	by Steel Plant	by Paper Plant
1	$ 400	$ 200
2	500	280
3	600	320

Table 28.1 Refer to Table 28.1.Suppose the government allows these two firms to trade pollution permits.The most efficient transaction would result in

Quizplus · Accepted Answer

The most efficient transaction would result in the paper plant reducing its emissions because it has a lower marginal cost (MC) to reduce emissions compared to the steel plant at all levels of reduction. This means it is cheaper for the paper plant to reduce emissions than it is for the steel plant.