Figure 10-7 -Two Firms, a and B, Each Currently Emit 100 Tons

question 136

Multiple Choice

Figure 10-7
-Two firms, A and B, each currently emit 100 tons of chemicals into the air. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution emitted into the air. The government gives each firm 40 pollution permits, which it can either use or sell to the other firm. It costs Firm A $200 for each ton of pollution that it eliminates before it is emitted into the air, and it costs Firm B $100 for each ton of pollution that it eliminates before it is emitted into the air. After the two firms buy or sell pollution permits from each other, we would expect that Firm A will emit

• A)20 fewer tons of pollution into the air, and Firm B will emit 100 fewer tons of pollution into the air.
• B)100 fewer tons of pollution into the air, and Firm B will emit 20 fewer tons of pollution into the air.
• C)50 fewer tons of pollution into the air, and Firm B will emit 50 fewer tons of pollution into the air.
• D)20 more tons of pollution into the air, and Firm B will emit 100 fewer tons of pollution into the air.

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Definitions:

Laying Off Employees

The process of either temporarily or permanently dismissing staff members from their jobs, typically as a result of economic declines or changes within the organization.

Workforce Reduction

The process of decreasing a company's employee numbers as part of a strategy to cut costs, improve efficiency, or adjust to market demands.

Distributive Justice

The perceived fairness of how resources and rewards are distributed within a society or organization.

Downsized

Having undergone a process where a company reduces its workforce to lower costs and improve efficiency, often resulting in layoffs.