Exhibit 30-3 Refer to Exhibit 30-3. Suppose that Firms A, B, and C are the only polluters in the state and that each emits 4 tons of pollution into the atmosphere. To cut the level of pollution in half, the government mandates system whereby each firm must reduce its pollution level by one-half. The total cost of complying with the mandate is

Question

Exhibit 30-3  Refer to Exhibit 30-3. Suppose that Firms A, B, and C are the only polluters in the state and that each emits 4 tons of pollution into the atmosphere. To cut the level of pollution in half, the government mandates system whereby each firm must reduce its pollution level by one-half. The total cost of complying with the mandate is

Quizplus · Accepted Answer

To cut the pollution level in half, each firm must reduce its emissions from 4 tons to 2 tons. From the diagram, we can see that this reduction will cost Firm A $600, Firm B $540, and Firm C $400. Therefore, the total cost of compliance is:
Total cost = $600 + $540 + $400 = $1,540. 
So, the best choice is B.