1) Suppose that the electric power industry is made up of two firms, each with t
ID: 1113720 • Letter: 1
Question
1) Suppose that the electric power industry is made up of two firms, each with two power-generating units. The table above shows the SO2 emissions for each firm and generator. Suppose also that the Environmental Protection Agency (EPA) wants to decrease SO2 emissions by 1000 tons. If the reduction in SO2 emissions occurs at the lowest possible cost, then the total cost of reducing the pollution is: 1) $100,000 2)$200,000 3)$250,000 4)$400
2)
Suppose that the electric power industry is made up of two firms, each with two power-generating units. The table above shows the SO2 emissions for each firm and generator. Suppose also that the Environmental Protection Agency (EPA) wants to decrease SO2 emissions by 1000 tons. If the EPA simply orders each firm to reduce pollution emissions from each generating unit by 50%, the total cost of reducing the pollution is: 1)$400,000 2)$1,000,000 3)$250,000 4)$200,000
SO2 Reduction SO2 Emissions Marginal Cost Firm Generator(tons)(per ton) Unit A Unit B 500 500 $100 $300 Firm 1 Unit C Unit D 500 500 $400 $800 | lim 2Explanation / Answer
for the reduction in SO2 emissions occurs at the lowest possible cost the industry it can do it by reducing the so2 emmissions of the firm 1 by(100$*500+300$*500) =50000+150000=200000$.
hence, ans is 2
now in the second case EPA has ordered to reduce the pollution emmissions from each generating unit by 50% so in this case the total cost of reducing the pollution is 250*100$+250*300$+250*400$+250*800$=250*(100+300+400+800)=250*1600=400000$
hence ans is 1
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