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Use the following data to answer questions 1-3: There are three industrial firms in Happy Valley:...

  1. Use the following data to answer questions 1-3:

    There are three industrial firms in Happy Valley:

    • Firm A       Pollution Level = 70 units     Cost to Reduce Pollution = $20 / Unit
    • Firm B       Pollution Level = 80 units     Cost to Reduce Pollution = $25 / Unit
    • Firm C       Pollution Level = 50 units     Cost to Reduce Pollution = $10 / Unit


    The government is considering options to reduce the pollution level to 90 total units. Suppose they decide to impose a 30 unit cap per firm. What would the total cost of the pollution cap be?

    A.

    $1400
    B.

    $2000
    C.

    $2250
    D.

    $3900

QUESTION 2

  1. Suppose the government decides to impose a pollution tax of $21 per unit. This tax will reduce the overall level of pollution to how many units?

    A.

    80 units
    B.

    90 units (exactly the level the government wants)
    C.

    120 units
    D.

    200 units (it won't reduce pollution at all)

  

QUESTION 3

  1. How much tax revenue would a $21 per unit pollution tax generate?

    A.

    $1680
    B.

    $2310
    C.

    $2520
    D.

    $4200

Solutions

Expert Solution

Rahul Sunny answered 8 months ago
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