今日知识点：

Externality and Government Intervention

例题

Externality and Government Intervention

Acme and US Electric run coal-burning power plants.  Each emits 40 tons of sulphur dioxide per month, total emissions = 80 tons/month.   

Goal:  Reduce SO2 emissions 25%, to 60 tons/month

Cost of reducing emissions: $100/ton for Acme, $200/ton for USE

Policy option 1:  Regulation

Every firm must cut its emissions 25% (10 tons).

Compute the cost to each firm and total cost of achieving goal using this policy. 

解析

Cost to Acme:  (10 tons) x ($100/ton) = $1000

Cost to USE:  (10 tons) x ($200/ton) = $2000

Total cost of achieving goal = $3000

下面我们为大家准备了一道同类型的题目，请大家一起来试试解答。

Question:  Tradable pollution permits

Initially, Acme and USE each emit 40 tons SO2/month.

Goal:  reduce SO2 emissions to 60 tons/month total.

Policy option 2:  Tradable pollution permits

Issue 60 permits, each allows one ton SO2 emissions.  Give 30 permits to each firm.  Establish market for trading permits.

Each firm may use all its permits to emit 30 tons, may emit < 30 tons and sell leftover permits, or may purchase extra permits to emit > 30 tons.

Compute cost of achieving goal if Acme uses 20 permits and sells 10 to USE for $150 each.

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正确答案及解析：

Acme

· sells 10 permits to USE for $150 each, gets $1500

· uses 20 permits, emits 20 tons SO2

· spends $2000 to reduce emissions by 20 tons

·  net cost to Acme:  $2000 - $1500 = $500

USE

· buys 10 permits from Acme, spends $1500

· uses these 10 plus original 30 permits, emits 40 tons

· spends nothing on abatement

· net cost to USE = $1500

Total cost of achieving goal = $500 + $1500 = $2000

Using tradable permits, goal is achieved at lower total cost and lower cost to each firm than using regulation.