Eaton

Business

5 October, 18:16

You own a coal mining company and at your current production level your direct production costs are $20 per unit, while you are selling your output for $40 per unit in a competitive coal market. Also each unit of production leads to $5 worth of pollution damage. Your production is heavily regulated by the US Environmental Protection Agency and you have been given an initial allocation of tradable pollution permits freely to be able to produce at your current production level (note that one pollution permit gives the right to produce one unit of output). Which of the following permit prices is the minimum price you would be willing to accept to entice you to sell one of your pollution permits A) $63

B) $42

C) $26

D) $17