Emissions: Tons/Day Marginal Cost of Reduction (Per Ton $10 10 20 10 Toad Donkey
ID: 1105554 • Letter: E
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Emissions: Tons/Day Marginal Cost of Reduction (Per Ton $10 10 20 10 Toad Donkey Kong Yoshi Question 8: There are three race car drivers: Toad, Donkey Kong, and Yoshi. Eaclh pollutes according to the table. The owner of the race track comes to you for advice, as the government is requiring him to reduce emissions by a half. Assume that each driver can reduce his emissions to zero (by not driving). You tell the owner how to reduce emissions in the most cost effective way. When doing this, you tel him the total cost is C1 S100 C2) $300 C 3) $500 C 4) $400 Question 9: There are three race car drivers: Toad, Donkey Kong, and Yoshi. Each pollutes according to the table. The owner of the race track comes to you for advice, as the government is requiring him to reduce emissions by a half. Assume that each driver can reduce his emissions to zero (by not driving). He insists that it is better to reduce emissions of each driver by a half. When doing this, you tell him the total cost is C 1) $450 C 2) $250 C 3) $500 4) $400 Question 10: Passage of the Clean Air ACt in 1970 and the formation of the Environmental Protection Agency (EPA) changed the way we deal with pollution. Previously common law and secure property rights were the methods used to protect people from harm by others.In the 1970s EPA technology standards restricted the amount of pollution firms could emit. In the 1990s tradable pollution permits were created to help control pollution levels. Which of the following is NOT true about pollution permits? Pollution permits give producers the right to pollute By charging market price for initial permits (assuming scarcity) those that have the highest cost to reduce pollution will buy them Permits have been effective at reducing pollution at a relatively low cost. Those that purchase pollution permits must use them (that is, emit pollutants in the amount of the permit) or they will be lost. CExplanation / Answer
We have the following information
Emissions: Tons/Day
Marginal cost of reduction (per ton)
Total Cost
Toad
10
$10
$(10×10) = $100
Donkey Kong
20
$20
$(20×20) = $400
Yoshi
10
$40
$(10×40) = $400
Now, the emission has to be reduced by half, in other words total emission has to be reduced from 40 to 20. The most cost effective way of achieving it is, by making Donkey King reduce emissions. This is because if reducing the emission of Donkey King would cost $400, while asking Toad and Yoshi to reduce their emissions would cost $500.
So, the total cost of reducing the emissions by half is $400.
Now, it is given that emission of each driver has to be reduced by half. So, we have the following situation
Emissions: Tons/Day
Reducing each driver’s emission by half
Marginal cost of reduction (per ton)
Total Cost with half emissions
Toad
10
5
$10
$(5×10) = $50
Donkey Kong
20
10
$20
$(10×20) = $200
Yoshi
10
5
$40
$(5×40) = $200
So, now the total cost of reducing the emissions will be
Total Cost = $(50 + 200 + 200)
Total Cost = $450.
The incorrect statement is those that purchase pollution permits must use them (that is, emit pollutants in the amount of the permit) or they will be lost.
Emissions: Tons/Day
Marginal cost of reduction (per ton)
Total Cost
Toad
10
$10
$(10×10) = $100
Donkey Kong
20
$20
$(20×20) = $400
Yoshi
10
$40
$(10×40) = $400
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