abatment cost hlep Suppose that two major fossil-fueled electric power plants ar

Question

abatment cost hlep

Suppose that two major fossil-fueled electric power plants are regulated by a cap and trade program. FirmJ and Firm K, face the following marginal abatement costs for reducing So2 MAC -1.2 A MACK 1.8 Ak Firm K emits 60 units of SO2 and has 50 permits. Firm 3 emits 40 units of So2 and has 30 permits.One permit allows a firm to emit one unit of S02. Which of the following is correct? O Firm J should abate 12 units and sell 2 permits to firm K 0 Firm K should abate 12 units and sell 2 permits to firm J O Firm K should abate 8 units and sell 2 permit to firm J O Firm J should abate 8 units and buy 2 permits to firm K

Explanation / Answer

For cost effcicient MAC for last SO2 frok both should be same

Thus 1.2Aj=1.8Ak

Aj=1.5Ak

And Aj+Ak=80

2.5Aj=80

Aj=32 and Ak=48

Thus ans is D

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