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kboard.ecu.edu/webapps/assessment/ta kelaunch.jsp?course-assessment_id=-473260.1 &course;_id -4 3492 5.1 &conten; QUESTION 5 Table 1 The following table shows the marginal costs for each of four firms (A, B, C, and D) to eliminate tons of chromium from their production processes. For example, for Firm A to eliminate one ton of chromium, it would cost $83, and for Firm A to eliminate a second ton of chromium it would cost an additional $84. Firm Ton to be eliminated First ton Second ton 83 84 90 97 57 68 70 35 40 46 50 62 71 91 hird ton Fourth ton Refer to Table 1. The table shows that in the absence of a chromium tax, each firm generates 4 tons of chromium, for a total of 16 tons. If the government wanted to reduce total chromium pollution by 5 tons (from 16 tons to 11 tons), which of the following taxes or fees per ton of chromium would achieve that goal? a, $65 O b. $100 c. $58 d. $85 QUESTION 6 Assume that your roommate is very messy. According to campus policy, your roommate has a right to be messy which means you don't have the right to a clutter-free apartment. Suppose your roommate gets a $100 benefit from heing messx and a messy apartment imposes a $300 cost on you. The Coase theorem would suggest that

Explanation / Answer

In this question, we must observe the given table of marginal cost for the firm to get eliminated, with reference to the options given for the chromium tax required to be imposed. Please note that the tax is required to reduce the aggregate production by exactly 5 tons i.e reduce the production from 16 tons to 11 tons.

Now, considering option (a), if the tax or fee per ton is levied as $65, firm A will still be producing all 4 tons sich $ 65 does not exceed its marginal cost at any of the 4 tons supplied by it. SImilar treatment for firm B will result in B losing 1 ton production as its marginal cost threshold is 57$ to stop production. Firm C will lose all its 4 tons of production since $ 65 is higher than all of its marginal cost to produce each ton. And, Firm D will also lose 1 ton as its first ton's marginal cost is capped at $62.

Now, total reduction in production by charging $65 as tax or fees is 0+1+4+1 = 6 tons

But, we need to reduce only 5 tons in production. Hence, option (a) is not the answer

Similarly, in case of option (b) and option (d), production will get even lesser than 11 tons because the fee charged is even higher than $ 65.

But, in case of option (c), fee charged is $58 which will make firm (c) to lose all its production tons and firm (b) to lose 1 ton of production. hence the total reduction will be 5 tons which is required.

Hence, the correct option is (c)

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