Suppose That There Are Three Power-Generating Plants,all of Which Generate

question 27

Multiple Choice

Suppose that there are three power-generating plants,all of which generate emissions.The table summarizes the cost of emission reduction for each firm given five different levels of pollution: $\begin{array}{lllllr}\text { Tons of smoke emitted per day } & 4 & 3 & 2 & 1 & 0 \\\text { Total abatement cost, firm A } & 0 & \$ 14 & \$ 30 & \$ 50 & \$ 75 \\\text { Total abatement cost, firm B } & 0 & \$ 20 & \$ 45 & \$ 80 & \$ 120 \\\text { Total abatement cost, firm C } & 0 & \$ 25 & \$ 60 & \$ 100 & \$ 150\end{array}$
The least costly way of lowering smoke emissions from 12 tons to 9 tons would be for

• A) each firm to reduce emissions by 1 ton,emitting 3 tons each.
• B) Firm A to emit 1 ton,and the other firms to emit 4 tons each.
• C) Firm A to emit 2 tons,Firm B to emit 4 tons and Firm C to emit 3 tons.
• D) Firm A to emit 0 tons;Firm B to emit 4.5 tons and Firm C to emit 4.5 tons.

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Definitions:

Price Fixing

An illegal agreement among competitors to set prices at a certain level, rather than letting them fluctuate naturally with market forces.

Industry Tightening

A period where industry competition becomes more intense, often leading to consolidation, increased regulation, or higher barriers to entry.

Monopolistic Competition

A market structure characterized by many competitors selling products that are similar but not identical.

Pure Competition

A market structure characterized by a large number of sellers offering identical products, where no single seller can influence market prices.