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2 Firms, Firm A and Firm B. Firm A graph : Vertical axis in $= 10 Horizontal axis emitting emission= 20 Firm B graph : Vertical axis in $= 30...

2 Firms,


Firm A and Firm B.


Firm A graph: Vertical axis in $= 10

Horizontal axis emitting emission= 20


Firm B graph: Vertical axis in $= 30

Horizontal axis emitting emission= 20


Question: Suppose the two firms are now allowed to trade (buy and sell) carbon permits. Which firm will buy permits and which firm will sell permits and how many permits will be traded between the firms? Why will they take this action? And what will be the equilibrium permit price?

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