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Question:

Consider an economy where there is a fishing company, F, and a steel company, S, both of which are prize winners. The steel production pollutes the nature, which harms the fishing industry's profit. The cost function of S is:

Cs(s,x)=3s2+2(sx)2 , where s 0 is produced steel, and x 0 is the amount of pollution.

The cost function of F is:

CF(s,x)=f2+xf

Where f0 is output of the fishing. Let the price for steel pS=18 and the price for fish be pF=7 .

QUESTION:

Derive the market equilibrium (s,x,f ) and the corporates profits, when it's free to pollute.

Thanks in advance! :-)

Posted Date: Jun 21, 2024 06:15 AM

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