Exhibit 31-3 -Refer to Exhibit 31-3.Suppose That Firms A,B,and C Are the A,B,and

Multiple Choice

Exhibit 31-3

-Refer to Exhibit 31-3.Suppose that Firms A,B,and C are the only polluters in the state and that each emits 4 tons of pollution into the atmosphere.To cut the level of pollution in half the government issues two transferable pollution permits to each firm (a cap and trade policy) . What is the total cost savings to society of decreasing pollution to half its present level if firm C buys one pollution permit from firm A and one pollution permit from firm B compared to if there were a government mandate for each firm to cut pollution by one-half?

A) $515
B) $1,300
C) $1,380
D) $965
E) $1,025