Emissions: Tons/Day Marginal Cost of Reduction (Per Ton) $10 Toad Donkey Kong Yo

ID: 1109217 • Letter: E

Question

Emissions: Tons/Day Marginal Cost of Reduction (Per Ton) $10 Toad Donkey Kong Yoshi 10 20 10 $40 There are three race car drivers: Toad, Donkey Kong, and Yoshi. Each pollutes according to the table. The owner of the race track comes to you for advice, as the government is requiring him to reduce emissions by a half. Assume that each driver can reduce his emissions to zero (by not driving). You tell the owner how to reduce emissions in the most cost effective way. When doing this, you tell him the total cost is: 1) $100 2) $300 3) $500 4) $400

Explanation / Answer

We have the following information

Emissions: Tons/Day

Marginal cost of reduction (per ton)

Total Cost

Toad

$10

$(10×10) = $100

Donkey Kong

$20

$(20×20) = $400

Yoshi

$40

$(10×40) = $400

Now, the emission has to be reduced by half, in other words total emission has to be reduced from 40 to 20. The most cost effective way of achieving it is, by making Donkey King reduce emissions. This is because reducing the emission of Donkey King would cost $400, while asking Toad and Yoshi to reduce their emissions would cost $500.

So, the total cost of reducing the emissions by half is $400.