Question

The citizens of Knoxville are complaining that the two pickle-makers in town, 'Crunchy Ponds pickles' and 'Sweet Rose pickles', are polluting the environment. Currently, each pickle-maker emits 20 tons of pollution per year. 'Crunchy Ponds pickles' could clean the pollution at a cost of $500 per ton. 'Sweet Rose pickles' could also clean the pollution, but a cost of $1,100 per ton. In an effort to reduce pollution, the government of Knoxville gives each pickle factory 10 tradable pollution permits. Each tradable pollution permit allows the owner to emit one ton of pollution, and its market value is $800. What is the cost of reducing pollution to the desired levels? How is this possible?

Answer 1

The cost of reducing pollution to the desired levels can be determined using a system of marketable permits. Each pickle factory is given 10 tradable pollution permits. The total cost of reducing pollution is $32,000.

Step-by-step explanation:

The cost of reducing pollution to the desired levels can be determined using a system of marketable permits. Each pickle factory is given 10 tradable pollution permits. The market value of each permit is $800.

Both 'Crunchy Ponds pickles' and 'Sweet Rose pickles' emit 20 tons of pollution per year. 'Crunchy Ponds pickles' can clean pollution at a cost of $500 per ton, while 'Sweet Rose pickles' can clean pollution at a cost of $1,100 per ton.

1. 'Crunchy Ponds pickles': The cost to clean 20 tons of pollution is 20 * $500 = $<<20*500=10000>>10,000.
2. 'Sweet Rose pickles': The cost to clean 20 tons of pollution is 20 * $1,100 = $<<20*1100=22000>>22,000.

The total cost of reducing pollution by using permits and cleaning the remaining pollution is $10,000 + $22,000 = $<<10000+22000=32000>>32,000.