SOLVED

81. Two firms, A and B, each currently dump 50 tons of chemicals into the local river. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river. The government will sell 40 pollution permits for $75 each. It costs Firm A $100 for each ton of pollution that it eliminates before it reaches the river, and it costs Firm B $50 for each ton of pollution that it eliminates before it reaches the river. Neither firm produces any less output, but they both conform to the law. It is likely that between the cost of permits and the cost of additional pollution abatement, a. Firm B will spend $3,500. b. Firm A will spend $4,000. c. Firm A will spend $4,500. d. Firm B will spend $3,000.  82. Which of the following require firms to pay to pollute? (i) corrective taxes (ii) tradable pollution permits (iii) pollution regulations  a. (i) only b. both (i) and (ii) c. (iii) only d. both (ii) and (iii)  Figure 10-6 83. Refer to Figure 10-6. How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome? a. An amount equal to P’ minus P. b. An amount equal to P’. c. An amount equal to P. d. An amount equal to the external cost.  Table 10-3 The following table shows the marginal costs for each of four firms (A, B, C, and D) to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, it would cost $54, and for Firm A to eliminate a second unit of pollution it would cost an additional $67.   Firm Unit to be eliminated A B C D First unit 54 57 54 62 Second unit 67 68 66 73 Third unit 82 86 82 91 Fourth unit 107 108 107 111  84. Refer to Table 10-3. If the government charged a fee of $69 per unit of pollution, how many units of pollution would the firms eliminate altogether? a. 7 b. 8 c. 9 d. 10  85. Refer to Table 10-3. If the government charged a fee of $84 per unit of pollution, how many units of pollution would the firms eliminate altogether? a. 7 b. 8 c. 9 d. 10   Â