Two Firms, a and B, Each Currently Dump 50 Tons

question 371

Multiple Choice

Two firms, A and B, each currently dump 50 tons of chemicals into the local river. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river. The government will sell 40 pollution permits for $75 each. It costs Firm A $100 for each ton of pollution that it eliminates before it reaches the river, and it costs Firm B $50 for each ton of pollution that it eliminates before it reaches the river. Neither firm produces any less output, but they both conform to the law. It is likely that between the cost of permits and the cost of additional pollution abatement,

• A)Firm B will spend $3,500.
• B)Firm A will spend $4,000.
• C)Firm A will spend $4,500.
• D)Firm B will spend $3,000.

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Definitions:

Thrust Faulting

A type of faulting caused by compressional forces where older layers of rock are pushed up and over younger layers.

Composite Volcanoes

Mountains formed from lava flows and pyroclastic eruptions, typically featuring steep profiles and periodic explosive eruptions.

Normal Faulting

A type of fault where the hanging wall moves downward relative to the footwall, typically occurring in regions undergoing extension.

Scoria

A dark-colored volcanic rock with abundant gas bubbles, typically found around basaltic volcanoes.