Suppose That Two Firms, X and Y, Face the Following

question 9

Multiple Choice

Suppose that two firms, X and Y, face the following abatement costs:
MAC_X = 1.2A_X, MAC_Y = 0.3A_Y
TAC_X = 0.6A_X² TAC_Y = 0.15A_Y²
Further assume that the combined abatement standard is 40 units for both firms. Use this information for any or all of Questions .
-Based on the model given, the cost-effective solution would arise if

• A) each firm abates 20 units of pollution
• B) firm X abates 8 units, and firm Y abates 32 units
• C) firm Y does all the abating because its MAC is lower
• D) firm X abates 24 units, and firm Y abates 16 units
• E) none of the above

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Definitions:

Cost of Services

Expenses directly related to the delivery of services, including labor, materials, and overhead costs.

Direct Labor Hours

The total time workers or employees spend creating a product or providing a service, often used in cost accounting.

Factory Overhead

Indirect manufacturing costs not directly tied to specific units produced, including maintenance, utilities, and salaries of supervisory staff.

Administrative Expenses

Costs related to the general administration of a business, such as salaries of senior executives, accounting, and human resources, that are not directly tied to any specific business activity.