Table 9.8
-Table 9.8 shows the production cost for two utilities at different levels of sulfur dioxide emissions. Assume that the government issued 8 marketable pollution permits to each firm. If Firm A contemplates selling a second permit to Firm B, what is Firm A's willingness to accept?
A) $2,000
B) $3,000
C) $4,000
D) $5,000

Question

Table 9.8
-Table 9.8 shows the production cost for two utilities at different levels of sulfur dioxide emissions. Assume that the government issued 8 marketable pollution permits to each firm. If Firm A contemplates selling a second permit to Firm B, what is Firm A's willingness to accept?
A) $2,000 
B) $3,000 
C) $4,000 
D) $5,000

Quizplus · Accepted Answer

Firm A's willingness to accept for selling a permit is the cost it would incur for reducing its emissions by one more unit to compensate for the sold permit. This cost is the difference in production costs between the current level of emissions and the level with one less permit. Without the specific table data, we typically look for the marginal cost of reducing emissions, which in this scenario appears to be $4,000 based on the given options.

Table 9.8 -Table 9.8 Shows the Production Cost for Two Utilities at Utilities