Refer to the Data Provided in Table 16 -Refer to Table 16

question 32

Multiple Choice

Refer to the data provided in Table 16.4 below to answer the following question(s) .
Table 16.4 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution.
Table 16.4
$$\begin{array} { | c | c | c | c | c | c | } \hline \text { Firm A } & \text { Firm A } & \text { Firm A } & \text { Firm B } & \text { Firm B } & \text { Firm B } \\\hline \begin{array} { c } \text { Reduction of } \\\text { Pollution by } \\\text { Firm A }\end{array} & \begin{array} { c } M C \text { of } \\\text { reducing } \\\text { pollution for } \\\text { Firm A }\end{array} & \begin{array} { c } T C \text { of } \\\text { reducing } \\\text { pollution for } \\\text { Firm A }\end{array} & \begin{array} { c } \text { Reduction of } \\\text { Pollution by } \\\text { Firm B }\end{array} & \begin{array} { c } M C \text { of } \\\text { reducing } \\\text { pollution for } \\\text { Firm B }\end{array} & \begin{array} { c } T C \text { of } \\\text { reducing } \\\text { pollution for } \\\text { Firm B }\end{array} \\\hline 1 & \$ 2 & \$ 2 & 1 & \$ 16 & \$ 16 \\\hline 2 & 6 & 8 & 2 & 24 & 40 \\\hline 3 & 12 & 20 & 3 & 32 & 72 \\\hline 4 & 20 & 40 & 4 & 40 & 112 \\\hline 5 & 30 & 70 & 5 & 48 & 160 \\\hline\end{array}$$
-Refer to Table 16.4. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade permits, what is the total cost of the pollution reduction?

• A) $48
• B) $80
• C) $86
• D) $162

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Definitions:

Balance Sheet

A financial statement that provides a snapshot of a company’s financial condition at a specific time, including assets, liabilities, and shareholders' equity.

Depreciation Methods

Various techniques used to systematically allocate the cost of a tangible asset over its useful life, including straight-line, declining balance, and units of production methods.

Goodwill

An intangible asset representing the excess value paid for a company over its book value, reflecting factors like brand reputation or customer relations.

Classified Balance Sheet

A balance sheet that organizes a company's assets, liabilities, and equity into subcategories for more detailed and understandable financial analysis.