Two Firms Can Use Five Different Technologies to Produce the Same

question 26

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. $\begin{array}{lllll}\text { Technology } & 1 & 2 & 3 & 4 & 5 \\\text { Emissions } & 10 \text { tons } & 8 \text { tons } & 6 \text { tons } & 4 \text { tons } & 2 \text { tons } \\\text { Acme's Costs } & \$ 750 & \$ 800 & \$ 1000 & \$ 1400 & \$ 2000 \\\text { FirmCo's Costs } & \$ 500 & \$ 700 & \$ 1200 & \$ 2200 & \$ 4000\end{array}$
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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