Table 9.7 -Table 9.7 Shows the Production Cost for Two Utilities at Utilities

question 208

Multiple Choice

Table 9.7
-Table 9.7 shows the production cost for two utilities at different levels of sulfur dioxide emissions. Assume that the government issued 8 marketable pollution permits to each firm. Suppose that Firm A has already sold a permit to Firm B. If Firm A contemplates selling a second permit to Firm B, what is Firm A's willingness to accept?

• A) $5,000
• B) $6,000
• C) $7,000
• D) $8,000

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Definitions:

Total Surplus

The sum of consumer surplus and producer surplus in a market, representing the total net benefits to society from the trade.

Price Of Ethanol

The cost at which ethanol, a type of alcohol used as fuel, is sold in the market.

Supply Curve

A graph showing the relationship between the price of a good and the amount of it that suppliers are willing to produce and sell, typically upward sloping.

Producer Surplus

The difference between what producers are willing to sell a good for and the actual price they receive, representing the additional benefit or surplus enjoyed by producers due to market conditions.