If it costs Con Ed approximately $26 per additional ton of air pollution abated, but it costs PG&E only $18 per additional ton of air pollution abated, the two companies could both benefit from trading a marketable pollution permit at any price between
A)$0 per ton and $18 per ton.
B)$0 per ton and $26 per ton.
C)$18 per ton and $26 per ton.
D)$26 per ton and $36 per ton.

Question

Quizplus · Accepted Answer

Trading in a marketable pollution permit would allow Con Ed and PG&E to reduce their pollution mitigation costs. Con Ed has a higher cost of $26 per additional ton of air pollution abated, while PG&E has a lower cost of $18 per additional ton of air pollution abated. If they were to trade in a marketable pollution permit, they could benefit by setting a price between $18 and $26 per ton that is more cost-effective for both companies. Therefore, the best choice is option C, which allows for a price range that benefits both companies.

If It Costs Con Ed Approximately $26 Per Additional Ton