Two firms gas firms, NorthernGas and Southern Gas, have access to five production processes, each giving off different amounts of pollution and costing different amounts to run. The cost to run each process and the amount of pollution emitted daily are described in the following table.

Process A B C D E

(amount of pollution) (4 metric tons/day) (3 metric tons/day) (2 metric tons/day) (1 metric tons/day) (0 metric tons/day)

Cost to Northern gas 70 140 340 490 660

($/day)

Cost to Southern gas 50 110 130 200 380

($/day)

(a) If pollution is unregulated, which process will each firm use? What will be the total daily pollution emission between these two firms?

(b)The government wants to cut pollution emissions by 50 percent. To attain this objective, the government institutes a bill that requires both firms to individually lower emissions by 50 percent. What is theincreasein the total cost to society of this bill?

(c)Instead of instituting a bill to lower emissions, the government decides to institute a tax of $T on each metric ton of pollution emitted per day. If the government still wants to lower total emissions by 50 percent between the two firms, what is thesmallestvalue of T possible, if T is a whole number? (Assume that if tax savings and increase in cost are the same, the firm willnotswitch processes.) What is the increase in the total cost to society of this policy? Explain your logic.