Two firms, Sludge Oil and Northwest Lumber, have access to five production processes, each one of which has a different cost and gives off a different amount of pollution. The daily costs of the processes and the corresponding number of tons of smoke emitted are as shown in the following table.

(LO3)

a. If pollution is unregulated, which process will each firm use, and what will be the total daily smoke emission?

b. The city council wants to curb smoke emissions by 50 percent. To accomplish this, it requires each firm to curb its emissions by 50 percent. What will be the increase in total cost to society due to this policy?

c. The city council again wants to curb emissions by half. This time, it sets a tax of $T per day on each ton of smoke emitted. How large will T have to be to effect the desired reduction? What is the total cost to society of this policy?