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25 November, 08:53

Suppose the united states has two utilities, commonwealth utilities and consolidated electric. both produce 20 million tons of sulfur dioxide pollution per year. however, the marginal cost of reducing a ton of pollution for consolidated electric is $250 per ton and the marginal cost of reducing a ton of pollution for commonwealth utilities is $350 per ton. the government's goal is to cut sulfur dioxide pollution in half (by 20 million tons per year)

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  1. 25 November, 12:02
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    A. Using a cap-and-trade system of tradable emission allowances will eliminate half of the sulfur dioxide pollution at a cost of $5,000 million per year.

    B. If permits cannot be traded, then the cost of the pollution reduction will be $6,000 million per year

    Explanation:

    A. Using a cap-and-trade system of tradable emission allowances will eliminate half of the sulfur dioxide pollution at a cost of $5,000 million per year.

    (250x20) = $5000

    B. If permits cannot be traded, then the cost of the pollution reduction will be $6,000 million per year

    [250 (10) + 350 (10) ]

    =$2,500+$3,500

    =$6,000
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