Answer 3 (a) : Emission standards and toxic emission control play a critical role in the upkeep of the economy of a country both directly and indirectly. If the pollution hazards are not dealt with implicitly, it can in due coarse of time lead to the total extinction of the social beings and natural factors of production thereby directly impact the economic downfall of a nation. In this case, both Toxic Wastes Management and Sludge industries are directly impacting to the pollution increase in the locality they reside by dumping the goo in to the lake. If the local Government cuts the legal goo emission in half for each firm, both the firms would be directly impacted by the new law. As per the given condition, Toxic Wastes Management production is highly dependent on the ability to dump the loo in the lake and it would cost the Toxic Wastes management $10 per gallon to clean up the goo it creates, therefore , if the law enforces to cut the goo emission to half , then it would also cost Toxic Wastes management half the amount of total money that it would spend in the clean up of the goo, i.e.
Total cost of clean up of the goo by Toxic Wastes Management per day = 1000 gallons x $ 10 (cost of cleanup of one gallon)
= $ 10000 per day
Now, if the emission law mandates to cut the waste dumping to half, then it would cost half this total cost per day, i.e. = 10000 / 2 = $ 5000 per day.
Similarly, Total cost of cleanup of the goo by Sludge Industries per day = 1000 gallons x $ 2 (cost of cleanup of one gallon)
= $ 2000 per day
Now, if the emission law mandates to cut the waste dumping to half, then it would cost half this total cost per day, i.e. = 2000 / 2 = $ 1000 per day.
If both firms unite in meeting the new goo emission standards, then the total cost of clean up of the goo would be = $ 5000 + $1000 divided by 2, i.e. = 6000/ 2
= $ 3000 per day for both firms combined.
Answer 3 (b) : If the tradable pollution permit of allowing 500 gallons of goo per day per company is implemented, then it would comparatively be more advantageous for both the firms. Since both the firms are now allowed 500 gallons per day and the Sludge Industries not over dependent in the dumping of the goo in the lake , most likely due to the less production by the industry would not require the complete quota of 500 gallons and the Toi castes management may come in to a contract with the Sludge industries to buy of the remaining of its quota and use it for itself. It will reduce the cost of bot the firms , but it will ultimately not reduce the waste disposal in to the lake by much.
Total cost of Tradable pollution permit by Toxic Wastes Management per day = 500 gallons x $ 10 (cost of cleanup of one gallon)
= $ 5000 per day
It will ask the Sludge industries to buy the remaining 300 gallons of quota of the disposal at a reduced rate= 5000 + 1000 , i.e.total cost would be $6000/2 = $ 3000 per day
Similarly , Total cost of Tradable pollution permit by Sludge industries per day = 200 gallons x $ 2 (cost of cleanup of one gallon)
= $ 400 per day
If both firms unite in meeting the new goo emission standards, then the total cost of clean up of the goo would be = $ 3000 + $600 divided by 2, i.e. = 3600/ 2
= $ 1800 per day for both firms combined.
3. Two companies Toxic Wastes Management and Sludge Industries both pollute a nearby lake Each firm...
Two firms, Gene's Gloves and Wally's Wallets, have factories near a lake. Both firms use a chemical for tanning leather. Some of this chemical runs into the lake. Each year Gene's Gloves dumps 15,000 gallons of the chemical and Wally's Wallets dumps 25,000 gallons of the chemical into the lake. A new study has found that fish and other wildlife are negatively impacted by this chemical. The government has decided to cap the total combined amount of the chemical that...
Two firms, Monolyte and NuPlant, are emitting toxic smoke into the local town. Monolyte emits 5 tons, each of which would cost $4000 to clean up, while NuPlant emits 8 tons, each of which would cost $3000 to clean. The town wants to reduce pollution to a maximum of 6 tons. For each of the following, indicate what the total cost of cleanup would be for the firms (note: the firms will only clean up as much as they are...
Joulutet 3. Assume that a firm has the following marginal benefit of pollution (denoted E for emissions, measured in tons): MB=150-5 E e. Now assume that instead the government allocates each firm permits to pollute equal to the total current pollution minus 12 tons, but allows the firms to trade. Which firm will purchase permits and which firm will sell permits? Hint: Notice that total pollution reduction of firm 1 plus firm 2 will be 24 tons. f. How much...
Question text Two firms, ABC Textile, Inc. and XYZ Coal Mining, Inc., each currently dump 12 tons of chemicals into the local river. The local government has decided that 24 tons of pollution is too much. They want to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river. The government gives each firm five pollution permits, which it can either use or sell to the other firm. ABC...
Two firms, ABC Textile, Inc. and XYZ Coal Mining, Inc., each currently dump 12 tons of chemicals into the local river. The local government has decided that 24 tons of pollution is too much. They want to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river. The government gives each firm five pollution permits, which it can either use or sell to the other firm. ABC Textile has...
5. Correcting for negative externalities - Regulation versus tradable permits Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two methods: Available Methods to Reduce Pollution 1. The government sets pollution standards using regulation. 2. The government allocates tradable pollution...
There are two firms producing cement. Each produces 20 units of pollution, and each has the ability to reduce pollution (abate) their emissions by operating some machine. The marginal damage of each unit of pollution to society is $3 (i.e., the marginal benefit of each unit of abatement is $3). The total cost of firm 1 is where denotes the amount of abatement of firm 1. The total cost of firm 2 is where denotes the amount of abatement of...
Possible Solutions
Total Cost of eliminating 2 units of
pollution
The options for the first fill in the blank (Firm X) are: $295,
$120, $215, $320.
The options for the second fill in the blank (Firm Y) are:
$1250, $800, $1850, $1500
The options for the third fill in the blank (Firm Z) are: $180,
$250, $230, $100
The options for the forth fill in the blank are: $1490, $2420,
$1625, $1645
Firm X
Firm Y
Firm Z
Initial pollution...
Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two methods: Available Methods to Reduce Pollution 1. The government sets pollution standards using regulation 2. The government allocates tradable pollution permits. Each firm faces different costs,...
Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two methods: Available Methods to Reduce Pollution 1. The government sets pollution standards using regulation. 2. The government allocates tradable pollution permits. Each firm faces different costs, so reducing pollution is...