There are two factories in a small town. Both of them emit carbon dioxide into the air. Their current monthly emissions, as well as their total costs for reducing emissions in 20-ton increments, are listed in the tables below. Current emissions (tons/month) 120 Total cost of reducing emissions by 20 tons/month $50 Total cost of reducing emissions by 40 tons/month $150 Total cost of reducing emissions by 60 tons/month $270 Total cost of reducing emissions by 80 tons/month $410 Total cost of reducing emissions by 100 tons/month $570 Factory 1 Current emissions (tons/month) 160 Total cost of reducing emissions by 20 tons/month $20 Total cost of reducing emissions by 40 tons/month $60 Total cost of reducing emissions by 60 tons/month $110 Total cost of reducing emissions by 80 tons/month $200 Total cost of reducing emissions by 100 tons/month $300

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
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Chapter17: Long-term Investment Analysis
Section: Chapter Questions
Problem 10E
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There are two factories in a small town. Both of them emit carbon dioxide into the air. Their current monthly emissions, as well as their total costs for
reducing emissions in 20-ton increments, are listed in the tables below.
Current emissions (tons/month)
120
Total cost of reducing emissions by 20 tons/month
$50
Total cost of reducing emissions by 40 tons/month
$150
Total cost of reducing emissions by 60 tons/month
$270
Total cost of reducing emissions by 80 tons/month
$410
Total cost of reducing emissions by 100 tons/month
$570
Factory 1
Current emissions (tons/month)
160
Total cost of reducing emissions by 20 tons/month
$20
Total cost of reducing emissions by 40 tons/month
$60
Total cost of reducing emissions by 60 tons/month
$110
Total cost of reducing emissions by 80 tons/month
$200
Total cost of reducing emissions by 100 tons/month
$300
Factory 2
Transcribed Image Text:There are two factories in a small town. Both of them emit carbon dioxide into the air. Their current monthly emissions, as well as their total costs for reducing emissions in 20-ton increments, are listed in the tables below. Current emissions (tons/month) 120 Total cost of reducing emissions by 20 tons/month $50 Total cost of reducing emissions by 40 tons/month $150 Total cost of reducing emissions by 60 tons/month $270 Total cost of reducing emissions by 80 tons/month $410 Total cost of reducing emissions by 100 tons/month $570 Factory 1 Current emissions (tons/month) 160 Total cost of reducing emissions by 20 tons/month $20 Total cost of reducing emissions by 40 tons/month $60 Total cost of reducing emissions by 60 tons/month $110 Total cost of reducing emissions by 80 tons/month $200 Total cost of reducing emissions by 100 tons/month $300 Factory 2
Assume that the existing technology does not allow for reductions in emissions beyond 100 tons/month. That is, the most each factory
can reduce its emissions is 100 tons/month. Also assume that if a factory owner is indifferent between reducing pollution or paying
taxes, the factory owner will choose to reduce pollution.
With those assumptions in mind, suppose the government has a goal of reducing total monthly emissions by 180 tons. To achieve this
goal, the government has decided to impose a tax on pollution. That is, for every 20-ton emission, a factory will have to pay some
amount of money. To achieve (but not exceed) the desired reduction in emissions, the tax will have to be set equal to or above $
but below $
per 20 tons/month.
Transcribed Image Text:Assume that the existing technology does not allow for reductions in emissions beyond 100 tons/month. That is, the most each factory can reduce its emissions is 100 tons/month. Also assume that if a factory owner is indifferent between reducing pollution or paying taxes, the factory owner will choose to reduce pollution. With those assumptions in mind, suppose the government has a goal of reducing total monthly emissions by 180 tons. To achieve this goal, the government has decided to impose a tax on pollution. That is, for every 20-ton emission, a factory will have to pay some amount of money. To achieve (but not exceed) the desired reduction in emissions, the tax will have to be set equal to or above $ but below $ per 20 tons/month.
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