5. The Rocky Mashed Potato Factory produces output at costs C= Q² (marginal costs 2Q), where Q is the quantity of mashed potatoes produced, in tons. In addition, 2 units of emissions are produced for each ton of mashed potatoes (E = 2Q). Pollution damage is $2 for each unit of emissions, which leads the government to charge $2 per unit of emissions as a Pigovian fee. The firm's output sells competitively for $10 per ton. a. How many tons of mashed potatoes will the Rocky Mashed Potato Factory pro- duce? How much does it pay in emission fees? What are its profits? b. A device is invented that would reduce the firm's emissions to one unit for each ton of output (E-OUHL such would the firm be willing to for such a device?
5. The Rocky Mashed Potato Factory produces output at costs C= Q² (marginal costs 2Q), where Q is the quantity of mashed potatoes produced, in tons. In addition, 2 units of emissions are produced for each ton of mashed potatoes (E = 2Q). Pollution damage is $2 for each unit of emissions, which leads the government to charge $2 per unit of emissions as a Pigovian fee. The firm's output sells competitively for $10 per ton. a. How many tons of mashed potatoes will the Rocky Mashed Potato Factory pro- duce? How much does it pay in emission fees? What are its profits? b. A device is invented that would reduce the firm's emissions to one unit for each ton of output (E-OUHL such would the firm be willing to for such a device?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:5. The Rocky Mashed Potato Factory produces output at costs C=Q² (marginal costs 2Q),
where Q is the quantity of mashed potatoes produced, in tons. In addition, 2 units of
emissions are produced for each ton of mashed potatoes (E = 2Q). Pollution damage
is $2 for each unit of emissions, which leads the government to charge $2 per unit of
emissions as a Pigovian fee. The firm's output sells competitively for $10 per ton.
a.
How many tons of mashed potatoes will the Rocky Mashed Potato Factory pro-
duce? How much does it pay in emission fees? What are its profits?
b.
A device is invented that would reduce the firm's emissions to one unit for each ton
of output (E = Q). How much would the firm be willing to pay for such a device?
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