Two Firms Can Use Five Different Technologies to Produce the Same

question 22

Multiple Choice

Two firms can use five different technologies to produce the same quantity of output: 1,2,3,4 and 5.The first technology is the cheapest,but also the dirtiest.The fifth technology is the most expensive,but results in the lowest levels of pollution.The amount of pollution emitted by each firm and the cost of the technologies are shown in the table. $$\begin{array} { l r l l l l } \text { Technology } & 1 & 2 & 3 & 4 & 5 \\\text { Emissions } & 10 \text { tons } & 8 \text { tons } & 6 \text { tons } & 4 \text { tons } & 2 \text { tons } \\\text { Acme's Costs } & \$ 750 & \$ 800 & \$ 1000 & \$ 1400 & \$ 2000 \\\text { FirmCo's Costs } & \$ 500 & \$ 700 & \$ 1200 & \$ 2200 & \$ 4000\end{array}$$
Suppose the firms are both currently using technology 1,and that the government adopts rules requiring each firm to reduce pollution by 20%.To comply,the firms will adopt technology ___ for a total cost of __________.

• A)1;$1250.
• B)2;$1500.
• C)3;$2200.
• D)4;$3600.

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Definitions:

Forecast Quality

The measure of how accurate and reliable forecasted data is when compared to actual outcomes.

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A statistical method used for estimating the relationships among variables, often used to predict the value of a dependent variable based on one or more independent variables.

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Treynor-Black Portfolio

A portfolio optimization model that blends a passive (market index) portfolio and an actively managed portfolio to achieve superior returns.