Suppose That There Are Two Firms, Each Generating Three Tons

question 298

Multiple Choice

Suppose that there are two firms, each generating three tons of SO 2 . Suppose also that the government has set a target abatement level of two tons. Under a policy of uniform abatement with permits each firm would receive

• A)two non-transferable pollution permits.
• B)two pollution permits which they could sell to each other.
• C)one pollution permit with a value equal to that firmʹs cost of abating one ton of SO2.
• D)one pollution permit with a value equal to the market price for a pollution permit.

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Definitions:

Estimated Salvage

The projected value of an asset at the end of its useful life.

Simple Rate of Return

A method to calculate the return on investment by dividing the annual incremental net operating income by the initial investment's cost.

Discount Rate

The discount rate that adjusts future cash flows to their current worth, accounting for the time value of money.

Investment Required

The total amount of capital needed to start or expand a business or project, encompassing all necessary expenses.