$$\begin{array}{l}
\begin{array} { c c c }
\hline \text { Waste water } & \text { Firm A } & \text { Firm B } \
\hline 200 & \$ 125 & \$ 200 \
100 & \$ 135 & \$ 212 \
0 & \$ 142 & \$ 240 \
\hline
\end{array}\
\text { Table } \mathbf { 9 . 6 }
\end{array}$$
-Consider the data in Table 9.6. Both firms can benefit if firm A sells its pollution permit allowing it to generate 100 gallons of wastewater to firm B for:
A)a price between $7 and $12.
B)a price between $0 and $7.
C)a price between $12 and $18.
D)Both firms cannot benefit if A sells permits to B.

Question

$$\begin{array}{l}
\begin{array} { c c c } 
\hline \text { Waste water } & \text { Firm A } & \text { Firm B } \
\hline 200 & \$ 125 & \$ 200 \
100 & \$ 135 & \$ 212 \
0 & \$ 142 & \$ 240 \
\hline
\end{array}\
\text { Table } \mathbf { 9 . 6 }
\end{array}$$
-Consider the data in Table 9.6. Both firms can benefit if firm A sells its pollution permit allowing it to generate 100 gallons of wastewater to firm B for:
A)a price between $7 and $12.
B)a price between $0 and $7.
C)a price between $12 and $18.
D)Both firms cannot benefit if A sells permits to B.

Quizplus · Accepted Answer

Firm A's cost of reducing wastewater from 200 to 100 gallons is $10 ($135 - $125), while Firm B's cost of reducing from 200 to 100 gallons is $12 ($212 - $200). Therefore, Firm B would be willing to pay more than $10 but less than $12 for the permit, allowing both firms to benefit.

-Consider the Data in Table 9