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. $\begin{array}{lllll}
\text { Technology } & 1 & 2 & 3 & 4 & 5 \
\text { Emissions } & 10 \text { tons } & 8 \text { tons } & 6 \text { tons } & 4 \text { tons } & 2 \text { tons } \
\text { Acme's Costs } & \$ 750 & \$ 800 & \$ 1000 & \$ 1400 & \$ 2000 \
\text { FirmCo's Costs } & \$ 500 & \$ 700 & \$ 1200 & \$ 2200 & \$ 4000
\end{array}$
In the absence of either government regulation or private negotiation,the 2 firms will produce using technology __________ and pollution will be __________.

Question

Quizplus · Accepted Answer

In the absence of regulation or negotiation, firms will choose the cheapest technology. For Acme, it's technology 1 at $750, and for FirmCo, it's also technology 1 at $500. This results in total emissions of 20 tons (10 tons each).

Two Firms Can Use Five Different Technologies to Produce the Same