Two Firms Can Choose from Five Different Technologies to Reduce

question 117

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 the government decides to sell 6 permits allowing a total of 6 tons of pollution.The government starts the bidding with an opening price of $30.What happens next?

• A)A total of five permits will be demanded,forcing the government to lower the price.
• B)Industrio will purchase all available permits at $30.
• C)Industrio will demand 3 permits and Capitalista will demand 3 permits.
• D)A total of seven permits will be demanded,forcing the government to raise the price.

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Definitions:

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The collective skills, knowledge, or other intangible assets of individuals that can be used to create economic value.

Wage Opportunities

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