Please help me with my problem set thank you

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Komalavalli · Accepted Answer

File Q4
Firm 1 pollutes 60 tons of CO2
Firm 2 pollutes 60 tons of CO2
Total level of pollution by both firms without a regulation 120 tons of CO2
a) The demand for pollution permits for each firm MAC1 = 1.2A1 and MAC2 = 0.4A2
b) The market demand for pollution permits is sum of each firm demand for pollution permits. Therefore Total market demand for pollution permit is 1.2A1+0.4A2.The market supply of pollution permit is 120 tons of CO2
c) Permit price is determined at a point where demand and supply for pollution permits each firm. 1.2A1+0.4A2 =120.
Let us assume A1=A2 
1.2A1+0.4A1 =120.
1.6 A1 =120
A1 = 120/1.6
Therefore A1 = A2 =75
For firm 1 MAC1 = P1 
P1= 1.2A1
Substituting A1 =75, we get
P1 = 1.2*75
P1 = $90
P1 pollution permit price for firm 1
For firm 2 MAC1 = P2 
P2 pollution permit price for firm 1
Substituting A2 =75, we get
P1 = 0.4*75
P1 = $30
d) The abatement of firm 1  is  75 and emission levels of CO2 of firm1 is 60 tons . The abatement of firm 2  is  75 and emission levels of CO2 of firm1 is 60 tons.
e) If government issues 60 tradable permits i.e 30 permit for each firm.
For firm 1 MAC1 = 30
1.2A1 = 30
A1 =25
For firm 2 MAC2 = 30
0.4A2 = 30
A2 =30/0.4
A2 = 75
Here we can see that firm 1 is shortage of pollution permits and firm 2 is durplus of pollution permits. Therefore firm 1will be a buyer and firm 2 will be a seller of permits
File Q1
Q1.

Please help me with my problem set thank you

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