Smog Corporation and Grimy Corporation Emit Pollution in Their Production

question 74

Essay

Smog Corporation and Grimy Corporation emit pollution in their production processes. The local government has established a standard for the pollution levels of Smog Corporation and Grimy Corporation of 25,000 units of pollution. To ensure this level of pollution is achieved efficiently, the government sells permits to the corporations that entitle them to emit a unit of pollution. Smog Corporation has the following demand function for pollution emission permits:
₌ 15,000 -
. Grimy Corporation's demand function for pollution emission permits is:
₌ 13,000 -
.
What is the equilibrium price of pollution permits? If the government makes the standard more stringent and allows only 15,000 units of pollution, what happens to the equilibrium price of pollution permits?

Understand how firms can create competitive advantages through the value chain.

Recognize the purpose and process of conducting a value chain analysis.

Identify factors that contribute to a firm's cost advantage or differentiation advantage.

Understand the strategic priority of value chain activities in achieving competitive advantage.

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Definitions:

Consideration

The value (such as money, a service, or a promise) that is given by one party to another in exchange for performing or promising to perform a certain act.

Stereo Speakers

Audio devices designed to reproduce sound with a sense of spatial depth and positioning, creating a stereo effect by having multiple components that output various channels of audio.

Consideration

Consideration is a legal term that refers to something of value promised to another when making a contract, and it is a necessary element for the contract to be enforceable.

Gift Causa Mortis

A gift made by an individual who believes they are nearing death, which will be revoked if the donor survives.