Firm Current emission Cost of reducing pollution
A 150 tons $50 per ton
B 200 tons $80 per ton
To reduce the total emission to 300 tons, the government is considering the following two plans.
Plan A: Forcing each firm to abate its emission by 25 tons.
Plan B: Granting 180 emission permits to Firm A, and Granting 120 permits to Firm B. Firms can trade the permits in the pollution permit market.
Compare the total cost of abatement in each plan. Explain the details of how you got the answer.