Question

The government allocates three allowances to each firm, where each allowance allows one unit to be emitted. If both firms now emit three units each, the total cost of reducing emissions for Firm 1 is ________ and the total cost of reducing emissions for Firm 2 is ________.

Answer 1

$180, $360. The complete question is attached in the picture below

Step-by-step explanation:

Total amount required to reduce three units of emissions by firm 1 = Sum of marginal costs from 0-3units required.

= $60 + $50 + $40 + $30 = $180

For firm 2, Sum of marginal costs for 0-3units emissions reduction

= $120 + $100 + $80 + $60 = $360