Economics

Two firms, A and B, each currently dump 50 tons of chemicals into the local river. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river. The government will sell 40 pollution permits for $75 each. It costs Firm A $100 for each ton of pollution that it eliminates before it reaches the river, and it costs Firm B $50 for each ton of pollution that it eliminates before it reaches the river. Neither firm produces any less output, but they both conform to the law. It is likely that between the cost of permits and the cost of additional pollution abatement,

a. Firm A will spend $4,500.


b. Firm B will spend $3,500.


c. Firm B will spend $3,000.


d. Firm A will spend $4,000.



Currently very confused because I guessed/tried really hard to do the math and got that Firm A would spend $4500 and Firm B would spend $3000. They're both an option though so like.........???? Can anyone help?
I did 20 x 75 for both firms first, since there were only 40 permits; I assumed they would each get half (20). 75 comes from the cost of each permit.
Then, for firm A I multiplied the remaining tons (30) by the cost, $100, and added the answer to 20 x 75.
Essentially did the same thing for firm B but 30(50) instead of 100.
Where did I go wrong? All insight welcome pls?

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asked by Camille
  1. its me again. still dont know the answer!

    posted by Camille

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