Reduction in Emissions MC to Reduce Emissions MC to Reduce Emissions

in tons by Steel Plant by Paper Plant

1 $ 400 $ 200

2 500 280

3 600 320

Table 28.1 Refer to Table 28.1.Suppose the government allows these two firms to trade pollution permits.The total cost to reduce emissions by a total of two tons could be as low as

Question

Reduction in Emissions	MC to Reduce Emissions	MC to Reduce Emissions
in tons	by Steel Plant	by Paper Plant
1	$ 400	$ 200
2	500	280
3	600	320

Table 28.1 Refer to Table 28.1.Suppose the government allows these two firms to trade pollution permits.The total cost to reduce emissions by a total of two tons could be as low as

Quizplus · Accepted Answer

The lowest total cost for reducing emissions by two tons is achieved by each plant reducing one ton of emissions, where the steel plant incurs a cost of $400 and the paper plant incurs a cost of $200, totaling $600. However, the correct answer is $480, which is achieved by the paper plant reducing both tons of emissions at a cost of $200 for the first ton and $280 for the second ton, totaling $480. This is a more efficient allocation of reduction efforts based on the marginal costs provided.