Refer to the table. Assume the cost of reducing one ton of sulfur dioxide is con

Question

Refer to the table. Assume the cost of reducing one ton of sulfur dioxide is constant. We Assume the cost of reducing one ton of sulfur dioxide is constant for each firm.) Which statement is FALSE? Social costs increase if Industry Y emits 40 tons of sulfur dioxide and Industry X emits zero tons. Industry X would agree to reduce its emissions by 1 ton if Industry Y paid it $401. If Industry X increases emissions by 1 ton and Industry Y decreases emissions by 1 ton, then the total amount of emissions remains constant but $100 is saved. Industry Y would be willing to reduce its emissions by 5 tons if Industry X paid it at least $2, 000. Use the following to answer question 17. (Table: Two Factories) If this firm is producing 5 units from Factory 1 and 4 units from Factory 2, it should produce 1 more unit in Factory 1 and produce 1 less unit in Factory 2. Produce all 9 units in Factory I, the low-cost factory. Not change production because it is minimizing costs.

Explanation / Answer

16) Answer is (2) because cost of Industry X is $ 500 so when Industry Y offers price of $ 401 then, Industry X will not reduce its emmission.

17) Answer is (1) produce 1 more unit of Factory 1 and produce 1 less unit of Factory 2 because marginal cost of Factory 2 is greater than the MC of Factory 1 so firm will decrease production of Factory 2 and increases production of Factory1.

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