Refer to the Data Provided in Table 16 -Refer to Table 16

question 125

Multiple Choice

Refer to the data provided in Table 16.4 below to answer the following questions.
Table 16.4 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution.
Table 16.4
$$\begin{array} { | c | c | c | c | c | c | } \hline \text { Firm A } & \text { Firm A } & \text { Firm A } & \text { Firm B } & \text { Firm B } & \text { Firm B } \\\hline \begin{array} { c } \text { Reduction of } \\\text { Pollution by } \\\text { Firm A }\end{array} & \begin{array} { c } M C \text { of } \\\text { reducing } \\\text { pollution for } \\\text { Firm A }\end{array} & \begin{array} { c } \text { TC of } \\\text { reducing } \\\text { pollution for } \\\text { Firm A }\end{array} & \begin{array} { c } \text { Reduction of } \\\text { Pollution by } \\\text { Firm B }\end{array} & \begin{array} { c } M C \text { of } \\\text { reducing } \\\text { pollution for } \\\text { Firm B }\end{array} & \begin{array} { c } T C \text { of } \\\text { reducing } \\\text { pollution for } \\\text { Firm B }\end{array} \\\hline 1 & \$ 1 & \$ 1 & 1 & \$ 8 & \$ 8 \\\hline 2 & 3 & 4 & 2 & 12 & 20 \\\hline 3 & 6 & 10 & 3 & 16 & 36 \\\hline 4 & 10 & 20 & 4 & 20 & 56 \\\hline 5 & 15 & 35 & 5 & 24 & 80 \\\hline\end{array}$$
-Refer to Table 16.4. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are not allowed to trade permits, what is the total cost of the pollution reduction?

• A) $24
• B) $46
• C) $76
• D) $115

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Definitions:

Learned Rules

Guiding principles acquired through experience or instruction that influence behavior and decision-making.

Sleeper Effect

A phenomenon where a message that was initially discounted and deemed unconvincing becomes more persuasive over time.

Persuasion

The action or process of convincing someone to believe or do something through reasoning or argument.

Subconsciously

Relating to the part of the mind that is not fully aware but influences actions and feelings.