Two firms, Kegareta Inc. and Sucio Enterprises, have access to five production processes, each one 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 accompanying table. If the government requires each firm to cut its emissions by 50 percent, what would be the total cost to society of this policy?

Question

Two firms, Kegareta Inc. and Sucio Enterprises, have access to five production processes, each one 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 accompanying table.  If the government requires each firm to cut its emissions by 50 percent, what would be the total cost to society of this policy?

Quizplus · Accepted Answer

Each firm will initially choose production process A and emit 4 tons of pollution per day. To cut pollution by 50 percent, each firm would have to move to production process C. This would cost Kegareta Inc. $95 ($135 - $40 = $95), and it would cost Sucio Enterprises $130 ($250 - $120 = $130). So, the total cost to society would be: $95 + $130 = $225.

Two Firms, Kegareta Inc