The following companies all manufacture widgets and dump tons of glop into the a
ID: 1115664 • Letter: T
Question
The following companies all manufacture widgets and dump tons of glop into the air.
Manufacturer
Costs to clean up 1 ton of glop
Current contribution to overall pollution
Polluters-r-us
$70
200
Smog brothers inc
$100
200
Really dirty industries
$30
200
The government wants to halve total pollution but does not know how much it will cost each company. Determine the total cost of the cleanup if the government employs a tradable permit scheme in which it gives the same amount of permits to each manufacturer at no cost.
Manufacturer
Costs to clean up 1 ton of glop
Current contribution to overall pollution
Polluters-r-us
$70
200
Smog brothers inc
$100
200
Really dirty industries
$30
200
Explanation / Answer
The total pollution level by the three firms collectively is 600 tonnes. The Government wants to reduce it by 300 units. They can create only 300 units of pollution. Tradeable permits are given , which are divided equally between the three companies that is of 100each. While they will be producing pollution of 100 tn each.
The total cost of cleanup would be = 7000+3000+10000= 20000
Manufacturer Cost to clean 1tn (B) Current Pollution (C) Cost to clean 1 70 200 100*70=7000 2 100 200 100*100=10000 3 30 200 100*30=3000Related Questions
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