Two firms can use five different technologies to produce the same quantity of output: 1,2,3,4 and 5.The first technology is the cheapest,but also the dirtiest.The fifth technology is the most expensive,but results in the lowest levels of pollution.The amount of pollution emitted by each firm and the cost of the technologies are shown in the table. $$\begin{array} { l r l l l l }
\text { Technology } & 1 & 2 & 3 & 4 & 5 \
\text { Emissions } & 10 \text { tons } & 8 \text { tons } & 6 \text { tons } & 4 \text { tons } & 2 \text { tons } \
\text { Acme's Costs } & \$ 750 & \$ 800 & \$ 1000 & \$ 1400 & \$ 2000 \
\text { FirmCo's Costs } & \$ 500 & \$ 700 & \$ 1200 & \$ 2200 & \$ 4000
\end{array}$$
Suppose the firms are both currently using technology 1,and that the government adopts rules requiring each firm to reduce pollution by 20%.To comply,the firms will adopt technology ___ for a total cost of __________.

Question

Two firms can use five different technologies to produce the same quantity of output: 1,2,3,4 and 5.The first technology is the cheapest,but also the dirtiest.The fifth technology is the most expensive,but results in the lowest levels of pollution.The amount of pollution emitted by each firm and the cost of the technologies are shown in the table. $$\begin{array} { l r l l l l } 
\text { Technology } & 1 & 2 & 3 & 4 & 5 \
\text { Emissions } & 10 \text { tons } & 8 \text { tons } & 6 \text { tons } & 4 \text { tons } & 2 \text { tons } \
\text { Acme's Costs } & \$ 750 & \$ 800 & \$ 1000 & \$ 1400 & \$ 2000 \
\text { FirmCo's Costs } & \$ 500 & \$ 700 & \$ 1200 & \$ 2200 & \$ 4000
\end{array}$$
Suppose the firms are both currently using technology 1,and that the government adopts rules requiring each firm to reduce pollution by 20%.To comply,the firms will adopt technology ___ for a total cost of __________.

Quizplus · Accepted Answer

To comply with the government's regulation, both firms need to reduce their pollution by 20% from the current level of 10 tons. This means they need to emit only 8 tons of pollution after adopting a new technology.

Acme's cost to adopt technology 2 is $800, which is cheaper than adopting technology 3 or higher. FirmCo's cost to adopt technology 2 is also reasonable compared to adopting technology 3 or higher. Both firms can meet the pollution reduction requirement by adopting technology 2 at a total cost of $800 + $700 = $1500.

Therefore, the best choice for the firms is to adopt technology 2, with a total cost of $1500.

Two Firms Can Use Five Different Technologies to Produce the Same