Suppose There Are Two Firms in an Industry with Marginal

question 10

Essay

Suppose there are two firms in an industry with marginal abatement cost curves:
MAC_A = 2,400 - 4E_A
MAC_B = 1,400 - E_B
If the regulator wants to use a transferable emission permit scheme to achieve industry abatement of 50%,how many permits will it need to issue and at what price will they trade? If the firms must buy their permits in an auction calculate the total compliance cost of each firm under this form of regulation.A.Total compliance cost is equal to the firms' total abatement cost plus their permit acquisition costs.

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