The Following Table Shows Four Firms, the Amount Each Pollutes

question 19

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 government establishes an effluent fee of $7.00 per ton, how much would the firms spend on reducing pollution?

• A) $660
• B) $1,710
• C) $1,820
• D) $2,100

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Definitions:

Tacit Price Agreement

An unspoken understanding among competitors to set prices at a certain level without explicit communication.

Kinked Demand Curve

A demand curve in oligopoly market structures, characterized by a distinct bend or kink, indicating different elasticity above and below the current price.

Buying Power

The ability of consumers or businesses to purchase goods and services, influenced by income levels and the price of goods and services.

Monopoly

A commercial environment in which a sole vendor markets a one-of-a-kind product.