2 A. The EPA wants to reduce emissions of sulphur dioxides from electric-generating power plants by 30 percent during the next year. To achieve this goal, the EPA will require each power-generating plant in the nation to reduce emissions by 300 tons per year. Suppose six power plants emit sulphur dioxides and serve a given metropolitan area. The following table shows the cost per ton of reducing emissions for each of the six plants: Cost per Ton of Plant Emissions Reduction A B O A $800 $775 $650 $580 $450 $400 F (1) Suppose that the EPA requires each of the five emitters to pay a fee of $550 for each ton of sulphur dioxide it dumps into the air during the year. Use the data in the table above to predict which companies will purchase pollution rights. [3 Marks) ANSWER (ii) What will be the total cost of achieving the reduction in sulphur dioxide emissions? [3 Narks] ANSWER (iii) How much revenue will be generated from the sale of pollution rights in the area? [3) Marks) INSTFR B) A cost-benefit analysis of a recent government project having an estimated life of six years is expected to have a social cost of $15m, $20m and $25m in years one, two and three respectively of construction. It is anticipated that the project will yield social benefits of $30 mannually starting in year 4) for the next three years. If the social rate of discount is ten percent (10%), determine if the government project should be undertaken. [11 Marks]