8) The graph below is of aggregate marginal damage and aggregate marginal

abatement costs associated with some pollutant. Suppose a regulator wishes

to control emissions with a competitive transferable emissions permit policy.

p*

Aggregate Marginal

Abatement Costs

d

C

Q*=E*

b

a

EU

Aggregate Marginal

Damage

Aggregate Emissions

a. Identify the efficient supply of emissions permits. What will be

the price of permits if sources trade them competitively? [1 point]

b. Identify the reduction in aggregate damage from the efficient

policy. [1 point]

c. Identify the aggregate abatement cost of the efficient policy. [1 point]

d. Identify the aggregate value of all emission permits. Under what

circumstances does this value accrue to the pollution sources?

Under what circumstances does this value accrue to the