The Following Table Shows Four Firms, the Amount Each Pollutes

question 11

Multiple Choice

The following table shows four firms, the amount each pollutes, the marginal cost for each firm to clean up pollution, and the total cost to each firm of eliminating all pollution. $\begin{array}{|c|c|c|c|}\hline \text { Firm } & \begin{array}{c}\text { Total Discharge (in } \\\text { tons) }\end{array} & \begin{array}{c}\text { Marginal Cost of } \\\text { Cleanup } \\\text { (per ton) }\end{array} & \begin{array}{c}\text { Total Cost of } \\\text { Cleanup }\end{array} \\\hline \text { A } & 60 & \$ 5.00 & \$ 300 \\\hline \text { B } & 70 & \$ 8.00 & \$ 560 \\\hline \text { C } & 80 & \$ 7.50 & \$ 600 \\\hline \text { D } & 90 & \$ 4.00 & \$ 360 \\\hline\end{array}$
The total discharge of these four companies is 300 tons. Assume there is no one else who pollutes. If the goal of the government is to reduce pollution by 50 percent, the cheapest way would be to have:

• A) all four firms cut their discharge by 50 percent
• B) have each firm reduce discharge by 37.5 tons.
• C) have firms A and D stop discharging and allow B and C to continue.
• D) have firms B and C stop discharging and allow A and D to continue.

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Definitions:

Materials Price Variance

The difference between the actual cost of materials used in production and the expected (or standard) cost, which can indicate changes in materials prices or sourcing efficiency.

Direct Materials

Basic substances used explicitly in the production of a particular item, which can be directly linked to its creation.

Materials Price Variance

The difference between the actual cost of materials used in production and the expected cost based on standard prices.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and constitute a significant portion of the production cost.