Question

two firms, sludge oil and northwest lumber, have access to five production processes, each one of which has a different cost and gives off a different amount of pollution. the daily costs of the processes and the corresponding number of tons of smoke emitted are as shown in the following table: process (smoke)a (4 tons/day)b (3 tons/day)c (2 tons/day)d (1 ton/day)e (0 tons/day)cost to sludge oil ($/day)5070120200500cost to northwest lumber ($/day)1001805001,0002,000a. if pollution is unregulated, and the firms have no incentive to reduce pollution, which process will each firm use, and what will be the total daily smoke emission?

Answer 1

In the absence of regulation and incentives, Sludge Oil will use process E with zero smoke emissions and Northwest Lumber will use process B with emissions of 3 tons/day. The total daily smoke emission will be 3 tons.

• In the given question, two firms, Sludge Oil and Northwest Lumber, have access to five production processes, each with a different cost and amount of pollution.
• The daily costs and smoke emissions for each process are tabulated.
• If pollution is unregulated and there is no incentive to reduce pollution, each firm will use the process that minimizes their cost.
• Sludge Oil will use process E with a cost of $500/day and zero smoke emissions.
• Northwest Lumber will use process B with a cost of $180/day and emissions of 3 tons/day.
• The total daily smoke emission will be 3 tons.