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Business, 14.04.2020 17:40 Terrydactly

Consider a cap-and-trade policy whereby the government of the firms’ home country issues tradable emission permits to the firms. Each firm is issued 10 permits. Each permit allows a firm to emit one unit of pollution. Firm’s can buy or sell permits. A firm’s production 2 must equal permits on hand after trading plus abatement. A firm is fined $70 for each unit of production that exceeds permits on hand plus abatement. What quantity will each firm produce? How many permits will Firm 2 sell to Firm 1? What will be the permit price? How much will each firm choose to abate? What will be the profit of each firm?

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