Final answer:
The cost of production includes not just the resources used but also the opportunity costs of alternative uses of those resources; this is true for any goods like cars, software, etc. With marketable permits for garbage reduction, firms can find a more efficient and cost-effective pollution control method.
Step-by-step explanation:
The statement the student asked about is false. The cost of producing furniture, or any good for that matter, includes the resources used in its production this also encompasses the opportunity costs associated with the alternative uses for those resources. Different products such as cars, computer software, haircuts, and fast-food meals, involve different production processes, input costs, and opportunity costs due to the diverse nature of the resources they require. For example, the production of cars involves significant capital in the form of machinery and parts, whereas haircuts primarily require skilled labor.
In the case of the chair-producing firms Elm, Maple, Oak, and Cherry, the cost of reducing garbage represents an economic trade-off. If the government requires each firm to reduce the weight of its garbage by one-fourth, the firms will incur direct costs associated with meeting this regulation. However, with the introduction of marketable permits, firms have the flexibility to buy or sell permits, depending on their individual reduction costs, which could result in a cost-effective way of reducing pollution while allowing the market to find the most efficient allocation of pollution reduction.