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

question 63

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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:

High pH

A condition where a solution has a pH value greater than 7, indicating it is basic or alkaline.

Agricultural

Pertaining to farming or the cultivation of plants and animals to provide food, fiber, medicinal plants, and other products.

Low pH

An acidic condition, representing a higher concentration of hydrogen ions, often found in environments like the stomach to aid in digestion.

Species Richness Hypothesis

The theory that ecosystems with more species tend to be more stable and productive than those with fewer species.

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