In the multiple-polluter case for a pollution permit system, suppose two firms, X and Y, face marginal abatement costs of MACX = 1.2AX and MACY = 0.4AY, respectively. To meet water quality standards, the government issues each firm pollution permits such that each firm must abate 20 units of pollution. If permit trading were allowed,
a. firm X would have an incentive to buy a permit as long as the price were less than $24
b. firm Y would be willing to sell a permit as long as the price were less than $8
c. at a permit price of $22, firm X would have an incentive to buy, but firm Y would have no incentive to sell
d. no trading would take place because neither firm has an incentive to trade based on this model
a. firm X would have an incentive to buy a permit as long as the price were less than $24
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