Elm Мaple Oak Cherry Current production of garbage (in tons) 20 40 60 80 Cost of reducing garbage by first five tons $5,500 $6,300 $7,200 $3,000 Cost of reducing garbage by second five tons $6,000 $7,200 $7,500 $4,000 Cost of reducing garbage by third five tons $6,500 $8,100 $7,800 $5,000 Cost of reducing garbage by fouth five tons $7,000 $9,000 $8,100 $6,000 Cost of reducing garbage by fifth five tons $0 $9,900 $8,400 $7,000 Table 12.6
Four firms called Elm, Maple, Oak, and Cherry, produce wooden chairs. However, they also produce a great deal
of garbage (a mixture of glue, varnish, sandpaper, and wood scraps). The first row of Table 12.6 shows the total
amount of garbage (in tons) that each firm currently produces. The other rows of the table show the cost of reducing
garbage produced by the first five tons, the second five tons, and so on. First, calculate the cost of requiring each firm
to reduce the weight of its garbage by one-fourth. Now, imagine that the government issues marketable permits for
the current level of garbage, but the permits will shrink the weight of allowable garbage for each firm by one-fourth.
What will be the result of this alternative approach to reducing pollution?
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