Two firms,A and B,each currently dump 50 tons of chemicals into the local river.The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river.The government gives each firm 20 pollution permits,which it can either use or sell to the other firm.It costs Firm A $100 for each ton of pollution that it eliminates before it reaches the river,and it costs Firm B $50 for each ton of pollution that it eliminates before it reaches the river.After the two firms buy or sell pollution permits from each other,we would expect that Firm A will dump
A) 10 fewer tons of pollution into the river, and Firm B will dump 50 fewer tons of pollution into the river.
B) 50 fewer tons of pollution into the river, and Firm B will dump 10 fewer tons of pollution into the river.
C) 30 fewer tons of pollution into the river, and Firm B will dump 30 fewer tons of pollution into the river.
D) 10 more tons of pollution into the river, and Firm B will dump 50 fewer tons of pollution into the river.
Correct Answer:
Verified
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