- 7 Two Firms Industrio And Capitalista Have Access To Five Production Processes Each Of Which Has A Different Cost An 1 (215.76 KiB) Viewed 44 times
7) Two firms, Industrio and Capitalista, have access to five production processes, each of which has a different cost and gives off a different amount of pollution. The daily costs of the processes and the corresponding number of tons of smoke emitted are shown in the accompanying table. Both firms currently use process A, and each emits 4 tons of smoke per day. The government is considering two plans to reduce pollution: requiring both firms to reduce pollution by 25 percent or auctioning pollution permits. Each permit would entitle the owner to emit one ton of smoke per day. Without a permit, no smoke can be emitted. Process A (4 tons/day) B (3 tons/day) C (2 tons/day) D (1 tons/day) E (0 tons/day) (smoke/day) Cost to Industrio $ 350 $ 400 $ 500 $ 700 $ 1,000 ($/day) 225 250 290 400 600 Cost to Capitalista ($/day) for the right to emit 1 ton of If neither firm had any permits, Industrio would be willing to pay up to smoke, and Capitalista would be willing to pay up to for the right to emit 1 ton of smoke. A) $50; $25 B) $1,000, $600 C) $50, $50 D) $300, $200 8) Continue from Question 7, suppose the government announces that all permits will be sold at $95. What happens next? A) Industrio will purchase 5 permits, Capitalista will purchase 3 permits. B) Industrio will purchase 2 permits, Capitalista will purchase 2 permits. C) Industrio will purchase 3 permits, Capitalista will purchase 2 permits. D) Industrio will purchase 2 permits, Capitalista will purchase 1 permits.