# Question: Two firms X and Y have access to five different

Two firms, X and Y, have access to five different production processes, each one of which gives off a different amount of pollution. The daily costs of the processes and the corresponding number of tons of smoke are listed in the table:

a. If pollution is unregulated, which process will each firm use, and what will be the total daily smoke emissions?

b. The city council wants to cut smoke emissions by half. To accomplish this, it requires a municipal permit for each ton of smoke emitted and limits the number of permits to the desired level of emissions. The permits are then auctioned off to the highest bidders. If X and Y are the only polluters, how much will each permit cost? How many permits will X buy? How many will Y buy?

c. Compare the total cost to society of this permit auction procedure to the total cost of having each firm reduce emissions byhalf.

a. If pollution is unregulated, which process will each firm use, and what will be the total daily smoke emissions?

b. The city council wants to cut smoke emissions by half. To accomplish this, it requires a municipal permit for each ton of smoke emitted and limits the number of permits to the desired level of emissions. The permits are then auctioned off to the highest bidders. If X and Y are the only polluters, how much will each permit cost? How many permits will X buy? How many will Y buy?

c. Compare the total cost to society of this permit auction procedure to the total cost of having each firm reduce emissions byhalf.

## Relevant Questions

A small village has six people. Each can either fish in a nearby lagoon or work in a factory. Wages in the factory are $4/ day. Fish sell in competitive markets for $1 apiece. If L persons fish the lagoon, the total number ...Once a week Smith purchases a six-pack of cola and puts it in his refrigerator for his two children to drink later. He invariably discovers that all six cans get drunk the first day. Jones also purchases a six-pack of cola ...Bert regards food and clothing as perfect 1-for-1 substitutes. Ernie regards them as perfect complements, always wanting to consume 3 units of clothing for every 2 units of food.a. Describe the set of allocations that are ...How will your answers to Problems 9, 10, and 11 differ if Friday’s maximum production figures change to 20 units of food and 50 units of clothing?A government is trying to decide how much of a public good to provide. The willingness-to-pay curves for each of its two citizens are as given in the diagram. The marginal cost curve for the public good is given by MC = Q/2, ...Post your question