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 that the government imposes a tax of $150 per ton of pollution.As a result,Acme adopts technology __________,and FirmCo adopts technology _______.

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 that the government imposes a tax of $150 per ton of pollution.As a result,Acme adopts technology __________,and FirmCo adopts technology _______.

Quizplus · Accepted Answer

To find the optimal technology choice for each firm, we need to consider the new costs with the pollution tax. The new costs for each technology would be:

Technology 1: 
Acme: $750 
FirmCo: $500 + ($150 x 10) = $2000

Technology 2: 
Acme: $800 + ($150 x 2) = $1100 
FirmCo: $700 + ($150 x 8) = $1900

Technology 3: 
Acme: $1000 + ($150 x 6) = $1900 
FirmCo: $1200 + ($150 x 6) = $2100

Technology 4: 
Acme: $1400 + ($150 x 4) = $2000 
FirmCo: $2200 + ($150 x 4) = $2800

Technology 5: 
Acme: $2000 + ($150 x 2) = $2200 
FirmCo: $4000 + ($150 x 2) = $4300

Thus, Acme would choose technology 3, which has a cost of $1900, and FirmCo would choose technology 2, which also has a cost of $1900. Therefore, the answer is B.

Two Firms Can Use Five Different Technologies to Produce the Same