Two companies, Dirty Inc. and Filthy Inc., each of which has access to 5 different production processes, each of which has a different cost and produces a different amount of pollution. The daily costs of the processes and the number of tons of smoke emitted are shown in the table below. $$\begin{array} { | c | c | c | c | c | c | }
\hline \text { Process } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \
\hline \text { (smoke/day) } & \text { (4 tons/day) } & \text { (3 tons/day) } & \text { (2 tons/day) } & \text { (1 ton/day) } & \text { (0ns/day) } \
\hline \text { Cost to Dirty Inc. (\$/day) } & \$ 110 & \$ 200 & \$ 380 & \$ 740 & \$ 1,460 \
\hline \text { Cost to Filthy Inc. (\$/day) } & \$ 400 & \$ 430 & \$ 490 & \$ 580 & \$700\
\hline
\end{array}$$ If the City Council imposes a tax of $91 per day on each ton of smoke emitted, then what will be the total cost to society of the resulting reduction in pollution?

Question

Two companies, Dirty Inc. and Filthy Inc., each of which has access to 5 different production processes, each of which has a different cost and produces a different amount of pollution. The daily costs of the processes and the number of tons of smoke emitted are shown in the table below. $$\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Process } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \
\hline \text { (smoke/day) } & \text { (4 tons/day) } & \text { (3 tons/day) } & \text { (2 tons/day) } & \text { (1 ton/day) } & \text { (0ns/day) } \
\hline \text { Cost to Dirty Inc. (\$/day) } & \$ 110 & \$ 200 & \$ 380 & \$ 740 & \$ 1,460 \
\hline \text { Cost to Filthy Inc. (\$/day) } & \$ 400 & \$ 430 & \$ 490 & \$ 580 & \$700\
\hline
\end{array}$$ If the City Council imposes a tax of $91 per day on each ton of smoke emitted, then what will be the total cost to society of the resulting reduction in pollution?

Quizplus · Accepted Answer

The tax incentivizes both companies to choose less polluting processes. Dirty Inc. will switch from process A (4 tons) to process B (3 tons) because the cost increase ($200 - $110 = $90) is less than the tax savings ($91). Filthy Inc. will switch from process A (4 tons) to process B (3 tons) for the same reason. The total cost to society is the sum of the increased costs for both companies: $90 + $90 = $180.

Two Companies, Dirty Inc If the City Council Imposes a Tax of $91 Per