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?

Table 12.6

Transcribed Image Text:

Current production of garbage (in tons) Cost of reducing garbage by first five tons Cost of reducing garbage by second five tons Cost of reducing garbage by third five tons Cost of reducing garbage by fouth five tons Cost of reducing garbage by fifth five tons Elm Maple $0 Oak 20 40 60 $5,500 $6,300 $7,200 $6,000 $7,200 $6,500 $8,100 $7,000 $9,000 $9,900 Cherry 80 $3,000 $7,500 $4,000 $7,800 $5,000 $8,100 $6,000 $8,400 $7,000