The Following Table Shows Four Firms, the Amount Each Pollutes

question 125

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. $$\begin{array} { | c | c | c | c | } \hline \text { Firm } & \begin{array} { c } \text { Total Discharge (in } \\\text { tons) }\end{array} & \begin{array} { c } \text { Marginal Cost of } \\\text { Cleanup } \\\text { (per tan) }\end{array} & \begin{array} { c } \text { Total Cost of } \\\text { Cleanup }\end{array} \\\hline \text { A } & 60 & \$ 5.00 & \$ 300 \\\hline \text { B } & 70 & \$ 8.00 & \$ 560 \\\hline \text { C } & 80 & \$ 7.50 & \$ 600 \\\hline \text { D } & 90 & \$ 4.00 & \$ 360 \\\hline\end{array}$$ 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:

Common Stock

A type of equity security that represents ownership in a corporation, granting holders voting rights and dividends.

Par Value

The face value of a bond or the stock value stated in the corporate charter.

Convertible Preferred Stock

A type of preferred stock that gives holders the option to convert their shares into a specified number of common shares, usually after a predetermined date.

Common Stock

A type of equity security that represents ownership in a corporation, giving shareholders voting rights and a share in the company's profits through dividends.