Question

The City Council wants to curb emissions by half and decides to auction off four permits, each of which entitles the bearer to emit 1 ton of smoke per day. No smoke may be emitted without a permit. Suppose the government conducts the auction by starting at $1 and asking how many permits each firm wants to buy at that price. If the total is more than four, it then raises the price by $1 and asks again, and so on, until the total quantity of demanded permits falls to four. How much will each permit sell for in this auction? Each permit will sell for $ . How many permits will each firm buy? Sludge Oil will purchase permit(s). Northwest Lumber will purchase permit(s). What will be the total cost to society of this reduction in pollution? Total cost of pollution reduction will be $ .

Answer 1

Answer

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Explanation  

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