The two firms listed below have five different technologies for pollution control to choose from: 1,2,3,4 and 5.The amount of pollution emitted and the cost of the technologies are shown in the table.In the absence of government oversight,the firms will pick technology 1 and emit 4 tons each.The government is considering two plans to reduce pollution: a 50% reduction by both firms or selling pollution permits.One permit entitles the owner to emit one ton of pollution.Without a permit,no pollution can be emitted.
-Refer to the information above.A government regulation that requires both firms to reduce pollution by 50% results in process _________ being adopted,with a private cost of ________.
A) 1;$575
B) 2;$650
C) 3;$810
D) 4;$1100
E) 5;$1600

Question

The two firms listed below have five different technologies for pollution control to choose from: 1,2,3,4 and 5.The amount of pollution emitted and the cost of the technologies are shown in the table.In the absence of government oversight,the firms will pick technology 1 and emit 4 tons each.The government is considering two plans to reduce pollution: a 50% reduction by both firms or selling pollution permits.One permit entitles the owner to emit one ton of pollution.Without a permit,no pollution can be emitted. 
-Refer to the information above.A government regulation that requires both firms to reduce pollution by 50% results in process _________ being adopted,with a private cost of ________.
A) 1;$575 
B) 2;$650 
C) 3;$810 
D) 4;$1100 
E) 5;$1600

Quizplus · Accepted Answer

To reduce pollution by 50%, both firms would need to emit 4 tons * 0.5 = 2 tons each.
For firm A, technology 3 would be the most cost-efficient, with a private cost of $400.
For firm B, technology 2 would be the most cost-efficient, with a private cost of $410.
The total private cost for both firms implementing these technologies would be $810. Thus, process 3 would be adopted with a private cost of $810. 
Selling pollution permits would depend on the market price of permits and the number of permits sold, so it is not clear which technology would be adopted.

The Two Firms Listed Below Have Five Different Technologies for Pollution