Question

Suppose two paper plants dump industrial waste into a river. The EPA decides pollution concentration is too high at a receptor site down river from the paper plants. The two firms have identical marginal cost of pollution abatement, but firm 1 has a transfer coefficient of 0.8 and firm 2 has a transfer coefficient of 0.3. To reduce pollution concentration at a receptor site, who should reduce dumping more? Select one: a. Firm 1 b. Firm 2 c. Both should reduce the same d. No way to tell

Answer 1

a. Firm 1

Step-by-step explanation:

from the information, firm 1 has a higher transfer coefficient of 0.8 compared to that of the firm 2, so to reduce pollution concentration at a recepto site, the firm with the higher transfer coefficient will have to decrease its dumping, in this case firm 1 should reduce dumping.