Two firms, Industrio and Capitalista, have access to five production processes, each of which has a different cost and gives off a different amount of pollution. The daily costs of the processes and the corresponding number of tons of smoke emitted are shown in the table below. Both firms currently use process A, and each emits 4 tons of smoke per day. The government is considering two plans to reduce pollution: requiring both firms to reduce pollution by 25 percent or auctioning pollution permits. Each permit would entitle the owner to emit one ton of smoke per day. Without a permit, no smoke can be emitted.
Given that both firms are currently using process A, if the government decided to auction pollution permits, it would need to sell ________ permits in order to reduce pollution by 25 percent.
A)6
B)4
C)2

Question

Two firms, Industrio and Capitalista, have access to five production processes, each of which has a different cost and gives off a different amount of pollution. The daily costs of the processes and the corresponding number of tons of smoke emitted are shown in the table below. Both firms currently use process A, and each emits 4 tons of smoke per day. The government is considering two plans to reduce pollution: requiring both firms to reduce pollution by 25 percent or auctioning pollution permits. Each permit would entitle the owner to emit one ton of smoke per day. Without a permit, no smoke can be emitted.   
Given that both firms are currently using process A, if the government decided to auction pollution permits, it would need to sell ________ permits in order to reduce pollution by 25 percent.
A)6 
B)4 
C)2

Quizplus · Accepted Answer

Reducing pollution by 25 percent would require reducing pollution from 8 to 6 tons of smoke per day. Thus, the government would need to auction 6 permits.

Two Firms, Industrio and Capitalista, Have Access to Five Production