I have additional permits which I will auction, one at a time, to the highest bidder. On your sheet, you see information about your firm's marginal cost and marginal product. Because you each have two permits, you all currently have the right to emit 200 tons of sulfur dioxide. If you were to buy another permit, you could emit 300 tons total, thereby increasing your output of electricity. Your additional output of electricity in megawatts you can read from the marginal product column.
Electricity sells for one million dollars per megawatt.
Every time you buy another permit, you may emit another 100 tons of sulfur dioxide. You may also choose to install pollution abatement equipment. If you install abatement equipment, you can produce electricity without emitting sulfur dioxide. So, for instance, if you would like to continue producing the amount of electricity you were producing up to today, then one way to do that is to use your two permits to emit 200 tons of sulfur dioxide and also install enough pollution abatement equipment to reduce 300 tons of sulfur dioxide. Your marginal cost of installing abatement equipment is given at the bottom of your sheet.