Three firms have marginal costs of pollution abatement as described below. Without regulation, each firm would pollute 3 units. Under command and control regulation each firm gets to pollute 1 unit. But the new Santorum administration decides that these permits should be tradable among these 3 firms. Explain whether each firm buys or sells permits, and show by how much each firm's costs go up or down. What is the total effect of allowing trading across all firms on the cost of pollution abatement?
Amount of pollution
Firm numbers 0 1 2
1 58 60 63
2 60 21 58
3 200 78 16