1)Why might a government not want to encourage competition in a market with a monopoly? 2)Firms Small, Medium, and Large are the only polluters of Big Horn Township in 2015

Subject:MarketingPrice:4.88 Bought3

Share With

1)Why might a government not want to encourage competition in a market with a monopoly?

2)Firms Small, Medium, and Large are the only polluters of Big Horn Township in 2015.

?? Each firm's pollution levels in 2015 and their respective marginal cost of pollution abatement are given below.

?? The township has decreed that its total pollution level in 2016 must decrease from 1200 tonnes in 2015 to 900 tonnes in 2016.

 

Firms (Companies)	Pollution Level in 2015 (Tonnes)	Marginal pollution abatement cost ($)	Pollution Permits Received by Each Firm in January 2016
Small	200	120	150
Medium	400	100	350
Large	600	90	400
	= 1200		= 900

Assumptions:

• The market price of a permit in 2016 is $105.
• If two sell permits, they must sell an equal number to the buyer of permits.

If each pollution permit sells for $105, Large Company will

a. reduce its year-to-year pollution by 200 tonnes

b. increase its year-to-year pollution by 225 tonnes

c. reduce its year-to-year pollution by 225 tonnes

d. maintain its 2015 pollution level