Find the demand for permits as a function

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Reference no: EM131391980

Assume a firm can generate 5q1 units of profit for each unit of output q1. Assume that each unit of production produces 0.2*(q1)2 units of pollution. Suppose the firm is endowed with one emission permit and can purchase additional permits at price p. (a) Find the demand for permits as a function of p. What is the corresponding output level? (b) Assume a second firm whose permit excess demand is 1−p. What is the equilibrium permit price?

Reference no: EM131391980

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