1.  Homework #4 – Oct. 8th  Exam #2 – Oct. 8th  Extra Credit Writing Assignment Oct. 17th  Writing Assignment Due Oct. 24th

2.  2-emitters pollute  Source 1 – polluting 700  Source 2 – polluting 300  Gov’t wants to reduce to 800 tons of pollution using a permit market  Marginal Control Cost where Q is quantity controlled. MCC(1)=1Q 1 MCC(2)=4Q 2

3.  Assume the government distributes the permits through a grandfathering system. 75% of the permits to source 1 and 25% of the permits go to source 2.  Which firm buys permits and which firm sells permits? How many permits are traded? At what price?  What is the total control cost for firm 1 and for firm 2?  What is the total cost of pollution for firm 1 and for firm 2?

4.  What should the tax be set at to reach the same level of pollution as the permit system?  What is the total control cost for firm 1?  What is the total control cost for firm 2?  What is the total cost of pollution for firm 1?  What is the total cost of pollution for firm 2?

6.  Assume firm 1 improves its technology of controlling pollution. Marginal Control Cost where Q is quantity controlled. MCC(1)=0.5 Q 1 MCC(2)=4Q 2  Which firm buys permits and which firm sells permits? How many permits are traded? At what price?  What is the total control cost for firm 1 and for firm 2?  What is the total cost of pollution for firm 1 and for firm 2?