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4. The Fireyear and Goodstone Rubber Companies are two firms located in the rubber capital of the world. These factories produce finished rubber and sell that rubber into a highly competitive world market at the fixed price of £60 per ton. The process of producing a ton of rubber also results in a ton of air pollution that affects the rubber capital of the world. This 1:1 relationship between rubber output and pollution is fixed and immutable at both factories. Consider the following information regarding the costs (in £) of producing rubber at the two factories (Q, and Qg): Fireyear Goodstone Costs: 300 + 20,² Costs: 500+ Q² Marginal costs: 4Q, Marginal costs: 20

4. The Fireyear and Goodstone Rubber Companies are two firms located in the rubber capital of the world. These factories produce finished rubber and sell that rubber into a highly competitive world market at the fixed price of £60 per ton. The process of producing a ton of rubber also results in a ton of air pollution that affects the rubber capital of the world. This 1:1 relationship between rubber output and pollution is fixed and immutable at both factories. Consider the following information regarding the costs (in £) of producing rubber at the two factories (Q, and Qg): Fireyear Goodstone Costs: 300 + 20,² Costs: 500+ Q² Marginal costs: 4Q, Marginal costs: 20

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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4. The Fireyear and Goodstone Rubber Companies are two firms located in the rubber capital of the world. These factories produce finished rubber and sell that rubber into a highly competitive world market at the fixed price of £60 per ton. The process of producing a ton of rubber also results in a ton of air pollution that affects the rubber capital of the world. This 1:1 relationship between rubber output and pollution is fixed and immutable at both factories. Consider the following information regarding the costs (in £) of producing rubber at the two factories (Q, and Qg): Fireyear Goodstone Costs: 300 + 20,² Costs: 500+ Q² Marginal costs: 4Q, Marginal costs: 2Q
Transcribed Image Text:4. The Fireyear and Goodstone Rubber Companies are two firms located in the rubber capital of the world. These factories produce finished rubber and sell that rubber into a highly competitive world market at the fixed price of £60 per ton. The process of producing a ton of rubber also results in a ton of air pollution that affects the rubber capital of the world. This 1:1 relationship between rubber output and pollution is fixed and immutable at both factories. Consider the following information regarding the costs (in £) of producing rubber at the two factories (Q, and Qg): Fireyear Goodstone Costs: 300 + 20,² Costs: 500+ Q² Marginal costs: 4Q, Marginal costs: 2Q
Total pollution emissions generated are E₂ + E = Q + Q. Marginal damage from pollution is equal to £12 per ton of pollution. In the absence of regulation, how much rubber would be produced by each firm? What is the profit for each firm? b. The local government decides to impose a Pigovian tax on pollution in the com- munity. What is the proper amount of such a tax per unit of emissions? What are the postregulation levels of rubber output and profits for each firm?
Transcribed Image Text:Total pollution emissions generated are E₂ + E = Q + Q. Marginal damage from pollution is equal to £12 per ton of pollution. In the absence of regulation, how much rubber would be produced by each firm? What is the profit for each firm? b. The local government decides to impose a Pigovian tax on pollution in the com- munity. What is the proper amount of such a tax per unit of emissions? What are the postregulation levels of rubber output and profits for each firm?
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