BU383 : Lesson 8 Practice Problems Solutions.2.pdf
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50,860 24,300 102,000 with quite low marginal abatement costs. Firm c does no abatement at all since its mac is so high relative to the fee. Firm b still does some abatement at its two lowest cost sources. The private compliance cost of the fee is much higher for each firm1 and for the industry as a whole since polluters are being made to pay the fee on their remaining emissions. You can see how this would be an incentive for firms to come up with ways to lower their marginal abatement costs in order to make it cheaper to reduce emissions rather than pay a fee on them. 5,180 = 1,295 permits and firm z gets 35% which is . 35 5,180 = 1,813 permits. First of all, note that the permit/allowance scheme will result in the very same cost effective allocation of abatement across firms as the effluent fee.
