ECON 103 Lecture Notes - Lecture 24: Root Mean Square, Economic Equilibrium, Reduction Potential
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If (cid:396)(cid:373)s ha(cid:448)e (cid:373)o(cid:396)e pe(cid:396)(cid:373)its the(cid:455) (cid:374)eed, (cid:272)a(cid:374) sell pe(cid:396)(cid:373)its. If rms have fewer permits than they need, must buy permits. If marginal cost abatement < p, the(cid:374) the (cid:396)(cid:373) (cid:272)a(cid:374) (cid:373)ake (cid:373)o(cid:374)e(cid:455) (cid:271)(cid:455) selli(cid:374)g the pe(cid:396)(cid:373)it a(cid:374)d reducing its own pollution. So, go(cid:448)e(cid:396)(cid:374)(cid:373)e(cid:374)t p(cid:396)i(cid:374)ts (cid:1011)(cid:1004)(cid:1004) pe(cid:396)(cid:373)its i(cid:374) total, (cid:449)he(cid:396)e ea(cid:272)h pe(cid:396)(cid:373)it allo(cid:449)s (cid:396)(cid:373) to e(cid:373)it o(cid:374)e to(cid:374)(cid:374)e of. If government gives each firm one half of the permits, then each firm can pollute 350 tonnes on. In this graph we have two firms who do not have to pay for pollution. Let"s say the policy makers decided they will allow 350 units per form, this is 700 units total. Policy makers might to knowhow to do this, so they simply just limit the firms to: let"s look at what happens. The firms must reduce their pollution by 450 units. For the firms, it can be difficult to reduce their pollution so much, it becomes expensive.