The Cost of Controlling Emissions at a Firm Goes Up

question 26

Multiple Choice

The cost of controlling emissions at a firm goes up rapidly as the amount of emissions reduced goes up. Here is a possible model: where q is the reduction in emissions (in pounds of pollutant per day) and C is the daily cost to the firm (in dollars) of this reduction. Government clean air subsidies amount to $750 per pound of pollutant removed. How many pounds of pollutant should the firm remove each day to minimize net cost (cost minus subsidy) ?

• A)2.5 pounds
• B)75 pounds
• C)2 pounds
• D)5 pounds
• E)10 pounds

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Definitions:

Capital Lease

A leasing arrangement in which the lessee records the leased asset as if it was a purchase, reflecting it on their balance sheet as an asset and a corresponding liability.

Lease Inception

The point in time at which a lease agreement is initiated or executed between the lessor and the lessee.

Capital Lease

A lease classified as a purchase by the lessee, allowing for the asset and liability to be recorded on the balance sheet.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, recognizing the decrease in value over time.