Smog Corporation and Grimy Corporation Emit Pollution in Their Production

question 49

Essay

Smog Corporation and Grimy Corporation emit pollution in their production processes. The local government has established a standard for the pollution levels of Smog Corporation and Grimy Corporation of 25,000 units of pollution. To ensure this level of pollution is achieved efficiently, the government sells permits to the corporations that entitle them to emit a unit of pollution. Smog Corporation has the following demand function for pollution emission permits: Grimy Corporation's demand function for pollution emission permits is: What is the equilibrium price of pollution permits? If the government makes the standard more stringent and allows only 15,000 units of pollution, what happens to the equilibrium price of pollution permits?

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Definitions:

Yamasee

A Native American tribe in the southeastern United States, known for the Yamasee War against English colonization.

Creek

Refers to a Native American people originally from the southeastern United States, also known as the Muscogee, or to a small flowing natural freshwater stream.

West African

Pertaining to the western region of the African continent, known for its diverse cultures, languages, and historical significance in the transatlantic slave trade.

Atlantic

Refers to the Atlantic Ocean, the second-largest of the world's oceans, lying between the Americas to the west and Europe and Africa to the east.