The following table shows four firms, the amount each pollutes, the marginal cost for each firm to clean up pollution, and the total cost to each firm of eliminating all pollution.FirmTotal Discharge (in tons)Marginal Cost of Cleanup(per ton)Total Cost of CleanupA60$5.00$300B70$8.00$560C80$7.50$600D90$4.00$360The total discharge of these four companies is 300 tons. Assume there is no one else who pollutes. Suppose that the government gives each company a pollution permit equal to 50 percent of its present discharge. However, companies are allowed to reduce pollution more than 50 percent and sell their permit or reduce less than 50 percent and buy a permit from another company. If firms maximize profits, what would happen?
A. Each firm would reduce pollution by 50 percent.
B. Firms A and D would eliminate pollution and sell their permits with a reasonable price to B and C, which would continue to pollute as before.
C. Firms B and C would eliminate pollution and sell their permits with a reasonable price to A and D, which would continue to pollute as before.
D. There is not enough information to answer this question.
Answer: B
You might also like to view...
Ronnie waits one hour in queue to buy a ticket to a rock concert. The opportunity cost of buying the $28 ticket:
a. is Ronnie's best alternative use of the sum of $28 spent on the ticket. b. is Ronnie's best alternative use of the one hour it took to wait in queue. c. is the revenue of $28 earned by the ticket agent. d. is Ronnie's best alternative use of both $28 and the one hour spent in the queue. e. cannot be measured because there is no opportunity cost associated with consumption.
If the Fed were to allow unemployment to remain at a higher level than NAIRU:
A. the dual mandate would be violated. B. It would lead to deflation. C. they would fail to maintain full employment. D. All of these statements are true.
In the presence of asymmetric information, a fixed-fee contract
A) achieves production efficiency.
B) can lead to opportunistic behavior on the part of the agent.
C) is impossible to write.
D) will result in the principal earning all of the profit.
The policy rate is
A) determined by monetary policy. B) a real interest rate. C) a risk premium. D) entering the IS equation.