Suppose There Are Only Two Firms That Pollute, a and B

question 73

Multiple Choice

Suppose there are only two firms that pollute, A and B, and each emits 10 tons of waste into the air. Firm A can reduce its pollution at a cost of $100 per ton, and Firm B can reduce its pollution at a cost of $500 per ton. Each has been given an emission credit that allows it to pollute 6 tons. If firms maximize profits, what will happen?

• A) Each firm will clean up 4 tons and pollute 6 tons.
• B) Firm B will buy four credits from A; B will emit 10 tons, and A 2 tons.
• C) Firm A will buy four credits from B; A will emit 10 tons, and B 2 tons.
• D) Firm B will buy one credit from A; it will cut pollution to 7 tons, and firm A will cut it to 5 tons.

---

Definitions:

Exhausted

describes a state of extreme tiredness or fatigue, often resulting from physical or mental activity.

Depleted

Reduced in quantity or exhausted; often used in context with natural resources.

Point Source

A single, identifiable source of pollution, such as a pipe or a drain, from which pollutants are discharged.

Pollution

The introduction of contaminants into the natural environment that cause adverse change to air, water, or soil.