Question 1: FILL IN THE HIGHLIGHTED BOXES
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WORKERS
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WAGE RATE
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TOTAL LABOR COST
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MARGINAL FACTOR COST
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1
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$ 12.00
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$ 12.00
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2
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$ 12.10
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$ 24.20
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3
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$ 12.20
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4
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$ 12.60
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Question 2: Using the following data, prove that pollution permits that can be bought and sold can reduce pollution from 12 units to 6 units at a lower cost than a regulation that specifies each of the three firms must cut its pollution in half.
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FIRM X
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FIRM Y
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FIRM Z
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Cost of Eliminating:
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First unit of Polution
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$ 200
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$ 500
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$ 1,000
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Second unit of Polution
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300
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700
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2,000
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Third unit of Polution
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400
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800
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2,900
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Fourth unit of Polution
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500
|
900
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3,400
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