Asked by Kaianah Sweeting on Jun 11, 2024
Verified
Refer to Table 16.2. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade permits, what is the total cost of the pollution reduction?
A) $24
B) $40
C) $43
D) $81
Pollution Reduction
Actions or policies aimed at decreasing the amount of pollutants released into the environment.
Government Caps
Maximum limits set by the government on prices, wages, or other economic variables to control the economy.
Total Cost
The total of all expenses involved in creating goods or services, encompassing both constant and changing costs.
- Recognize the part played by governmental authorities and the private industry in moderating external factors by employing permissions, fiscal charges, and economic incentives.
Verified Answer
JS
Jasmine SmithJun 12, 2024
Final Answer :
C
Explanation :
The total cost of pollution reduction when firms are allowed to trade permits can be calculated by adding the total cost (TC) of reducing pollution for each firm to the desired level. Firm A's cost to reduce pollution by 3 units (from 5 to 2) is $10, and Firm B's cost to reduce pollution by 3 units is $36. Therefore, the total cost is $10 (Firm A) + $36 (Firm B) = $46, not $43. However, given the options provided and the context of the question, it seems there might be a misunderstanding or typo in the question or answer choices. Based on the provided data and typical understanding, the correct calculation leads to $46, which is not an option. Thus, without an exact match in the options, reevaluation of the question or provided data might be necessary.
Learning Objectives
- Recognize the part played by governmental authorities and the private industry in moderating external factors by employing permissions, fiscal charges, and economic incentives.