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Two Farmers, a and B, Each Apply 100 Tons of Manure

question 63

Multiple Choice

Two farmers, A and B, each apply 100 tons of manure on their fields. To reduce manure runoff, the government has decided to require a permit for each ton of manure applied. The government gives each farmer 50 permits. Farmer A incurs losses of $25 for each ton of manure he does not apply, and Farmer B incurs losses of $50 for each ton of manure he does not apply. What is the total cost of reducing runoff if firms are not allowed to buy and sell permits from each other? What is the total cost of reducing runoff if the firms are allowed to buy and sell permits from each other?


Definitions:

Legal

Pertains to matters related to the law, including legislation, rights, obligations, and the judicial system.

Illegal Behavior

Actions or activities that are forbidden by law and subject to legal penalties.

Integrity

The quality of being honest and having strong moral principles, or moral uprightness.

Fairly

In a just, equitable, and unbiased manner, ensuring impartial treatment or judgment.

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