Two Firms Can Choose from Five Different Technologies to Reduce

question 88

Multiple Choice

Two firms can choose from five different technologies to reduce their pollution: A,B,C,D and E.The amount of pollution emitted by each technology and the cost of the technologies are shown in the table.Both firms have adopted technology A and currently emit 4 tons apiece.The government is considering two plans to reduce pollution: a 50% reduction by both firms or selling pollution permits.One permit entitles the owner to emit one ton of pollution.Without a permit,no pollution can be emitted.
$$\begin{array} { l c c c c c } & \mathrm { A } : & \mathrm { B } : & \mathrm { C } : & \mathrm { D } : & \mathrm { E } : \\& 4 \text { tons } & 3 \text { tons } & 2 \text { tons } & 1 \text { ton } & \text { no pollution } \\\text { Industrio } & \$ 350 & \$ 400 & \$ 500 & \$ 700 & \$ 1000 \\\text { Capitalista } & \$ 225 & \$ 250 & \$ 290 & \$ 400 & \$ 600\end{array}$$
Suppose a permit system has been adopted and each firm has already purchased one permit.Industrio would be willing to pay up to ___ for the right to discharge a second ton of pollution,and Capitalista would be willing to pay up to __ for the right to discharge a second ton of pollution.

• A)$200;$300
• B)$200;$110
• C)$100;$40
• D)$500;$290

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Definitions:

Fixed Overhead Budget Variance

The difference between the fixed overhead costs that were budgeted and the actual fixed overhead costs incurred.

Fixed Manufacturing Overhead

Costs that remain constant regardless of the level of production or sales volume, such as salaries of supervisors and rent for factory premises.

Fixed Manufacturing Overhead

Indirect manufacturing costs that remain relatively constant regardless of the volume of production, including costs like factory rent, salaries of supervisors, and depreciation of factory equipment.

Direct Labor

The cost of wages for labor directly involved in the production of goods or services.