Minnesota Has Two Oil Refineries That Emit Methane Gas

question 76

Multiple Choice

Minnesota has two oil refineries that emit methane gas. The Bend refinery emits 300 units of methane, and the Park refinery emits 900 units. Government regulators would like to reduce total methane emissions from 1,200 to 900 units. Bend's total abatement and marginal abatement costs are TC_B = 400Q_B + 4Q_B² and MAC_B = 400 + 8Q_B, where Q is units of methane. Park's total abatement cost and marginal abatement costs are TC_P = 40Q_P + 2Q_P² and MAC_P = 40 + 4Q_P.
Suppose that government regulators require each refinery to remove 150 units of methane. The total cost of removing these 150 units for the Park refinery is $____.

• A) 201,000
• B) 172,200
• C) 150,000
• D) 51,000

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Definitions:

Discount Rate

A percentage used to calculate the present value of future cash flows or investments.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, discounting future amounts to their present values.

Annual Rate

Typically refers to the interest rate for a whole year, often applied in terms of loans, investments, or savings.

Invests

The act of allocating resources, usually money, with the expectation of generating an income or profit.