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

question 57

Multiple Choice

Refer to the data provided in Table 16.3 below to answer the following question(s) .
Table 16.3 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution.
Table 16.3
$$\begin{array} { | c | c | c | c | c | c | } \hline \text { Firm A } & \text { Firm A } & \text { Firm A } & \text { Firm B } & \text { Firm B } & \text { Firm B } \\\hline \begin{array} { c } \text { Reduction of } \\\text { Pollution by } \\\text { Firm A }\end{array} & \begin{array} { c } M C \text { of } \\\text { reducing } \\\text { pollution for } \\\text { Firm A }\end{array} & \begin{array} { c } T C \text { of } \\\text { reducing } \\\text { pollution for } \\\text { Firm A }\end{array} & \begin{array} { c } \text { Reduction of } \\\text { Pollution by } \\\text { Firm B }\end{array} & \begin{array} { c } M C \text { of } \\\text { reducing } \\\text { pollution for } \\\text { Firm B }\end{array} & \begin{array} { c } T C \text { of } \\\text { reducing } \\\text { pollution for } \\\text { Firm B }\end{array} \\\hline 1 & \$ 8 & \$ 8 & 1 & \$ 16 & \$ 16 \\\hline 2 & 12 & 20 & 2 & 24 & 40 \\\hline 3 & 18 & 38 & 3 & 32 & 72 \\\hline 4 & 26 & 64 & 4 & 40 & 112 \\\hline 5 & 36 & 100 & 5 & 48 & 160 \\\hline\end{array}$$
-Refer to Table 16.3. 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 not allowed to trade permits, what is the total cost of the pollution reduction?

• A) $60
• B) $110
• C) $116
• D) $260

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Definitions:

Cut-Throat Competitor

A company or individual that employs aggressive and ruthless tactics to maintain or increase its market position.

Colluder

An entity that engages in collusion, cooperating with others secretly or illegally to deceive or defraud.

Degree Of Oligopolization

The extent to which a market or industry is dominated by a few large companies, limiting competition.

Collusion

An agreement between competing firms to control prices or exclude entry of a new competitor in the market, often in secret, to reduce competition and increase profitability.