QUESTION 5 Assume that the five firms in the following table each throw 5 units

Question

QUESTION 5 Assume that the five firms in the following table each throw 5 units of pollution into the environment every day. The cost of eliminating these units of pollution is given in the table. MARGINAL Cost of Eliminating Pollution Tons of Firm AFirm B Firm C 140 580 680 980 100 200 900 1300 Firm D Firm E 2000 3000 4000 5000 6000 150 1st 2nd 3rd 4th 5th 240 440 640 840 250 17001280 350 Using the table above, suppose the Environmental Protection Agency decides that the optimal amount of pollution is only 15 tons. Instead of using the set standard method, the government sells 15 permits to pollute at a price of $425 each. Each permit allows the firm to pollute 1 ton. By using the permit method the total real resource costs to clean-up are O $2,090 $2,130 $6,690 $5,925 O $4,650

Explanation / Answer

Answer:- Using the table above, suppose the Environmental Protection Agency decides thatthe optimal amount of pollution is only 15 tons. Instead of using the set standardmethod, the government sells 15 permits to pollute at a price of $425 each. Eachpermit allows the form to pollute 1 ton. By using the permit method the totalrealresource costs to clean-up are

Correct Answer :- $2130

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