Two firms, Cappcore and T

Two firms, Cappcore and T

Two firms, Cappcore and Tradiola, are each emitting 6 units of pollution, and the government wants to reduce the total level of pollution from the curent level of 12 to 4. To do this, the government caps each firm’s allowed pollution level at 2. Each firm must now pay to cut pollution levels by 4 units. A cap-and-trade policy gives each firms allows them to trade permits if they choose. Based on the table below which represents the situation faced y these two firms, what will the firms want to do?Cappcorepollution reduction units MC of reducing pollution TC of reducing pollution1 $7 $72 10 173 14 314 19 505 26 766 35 111Tradiolapollution reduction units MC of reducing pollution TC of reducing pollution1 $3 $32 4 73 6 134 9 225 14 366 21 57

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