A) The total abatement is maximised under the cap and trade equilibrium.B) In the cap and trade equilibrium, Firm B’s gains from trade is (P* – P A) x (E X – E*/2)/2.C) Under the 50:50 split, Firm A’s total cost of abatement is given by PA x E*/2.D) Under cap and trade, Firm B pays Firm A an amount P* x (E X – E*/2), where E X is the abatement of Firm A after trade. The figure shows the two outcomes of abatement using CO2 permits: the50:50 split and the cap and trade equilibrium. The total amount of abatement isE*. Based on this information, which of the following statements is correct?50-50 initialsplit of permitsSplit after tradingMPCA, Firm BAbatement by BAbatement by AMPCA, Firm ATotal abatement required, E*(e.g. units of CO, abated)Abatement costs, Firm A ($)Abatement costs, Firm B ($)

▪︎A) The overall reduction is set at E*. The equilibrium of the cap-and-trade programme achieves the…

A) The total abatement is maximised under the cap and trade equilibrium. B) In the cap and trade equilibrium, Firm B’s gains from trade is (P* – P A) x (E X – E*/2)/2. C) Under the 50:50 split, Firm A’s total cost of abatement is given by PA x E*/2. D) Under cap and trade, Firm B pays Firm A an amount P* x (E X – E*/2), where E X is the abatement of Firm A after trade.

A) The total abatement is maximised under the cap and trade equilibrium. B) In the cap and trade equilibrium, Firm B’s gains from trade is (P* – P A) x (E X – E/2)/2. C) Under the 50:50 split, Firm A’s total cost of abatement is given by PA x E/2. D) Under cap and trade, Firm B pays Firm A an amount P* x (E X – E*/2), where E X is the abatement of Firm A after trade.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter14: Environmental Economics

Section: Chapter Questions

Problem 17SQ

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