Two firms can choose from five different technologies to reduce their pollution: A,B,C,D and E.The amount of pollution emitted by each technology and the cost of the technologies are shown in the table.Both firms have adopted technology A and currently emit 4 tons apiece.The government is considering two plans to reduce pollution: a 50% reduction by both firms or selling pollution permits.One permit entitles the owner to emit one ton of pollution.Without a permit,no pollution can be emitted.
$\begin{array}{lccccc}
& \text { A: } & \text { B: } & \text { C: } & \text { D: } & \text { E: } \
& 4 \text { tons } & 3 \text { tons } & 2 \text { tons } & 1 \text { ton } & \text { no pollution } \
\text { Industrio } & \$ 350 & \$ 400 & \$ 500 & \$ 700 & \$ 1000 \
\text { Capitalista } & \$ 225 & \$ 250 & \$ 290 & \$ 400 & \$ 600
\end{array}$
The ultimate equilibrium price of six permits is __________ with Industrio buying __________ and Capitalista buying __________.

Question

Two firms can choose from five different technologies to reduce their pollution: A,B,C,D and E.The amount of pollution emitted by each technology and the cost of the technologies are shown in the table.Both firms have adopted technology A and currently emit 4 tons apiece.The government is considering two plans to reduce pollution: a 50% reduction by both firms or selling pollution permits.One permit entitles the owner to emit one ton of pollution.Without a permit,no pollution can be emitted.
$\begin{array}{lccccc} 
& \text { A: } & \text { B: } & \text { C: } & \text { D: } & \text { E: } \
& 4 \text { tons } & 3 \text { tons } & 2 \text { tons } & 1 \text { ton } & \text { no pollution } \
\text { Industrio } & \$ 350 & \$ 400 & \$ 500 & \$ 700 & \$ 1000 \
\text { Capitalista } & \$ 225 & \$ 250 & \$ 290 & \$ 400 & \$ 600
\end{array}$
The ultimate equilibrium price of six permits is __________ with Industrio buying __________ and Capitalista buying __________.

Quizplus · Accepted Answer

To achieve a 50% reduction in pollution, each firm needs to reduce its emission from 4 to 2 tons. The cost of adopting technology C is the lowest for both firms. So, they will adopt technology C which will cost Industrio $500 and Capitalista $290.

Alternatively, if the government sells six permits, each firm needs to buy 3 permits to emit 2 tons of pollution. The cost of buying 3 permits is the lowest if the market price of one permit is $50. So, both firms will buy 3 permits each, which will cost them $150 in total.

Two Firms Can Choose from Five Different Technologies to Reduce