Economics (AS & A Level) · Oct / Nov 2022 · Paper 33 · Question 14
9708Government policies to achieve efficient resource allocation and correct market failure
The table shows a firm that has four possible methods of production. Each method has a different cost and causes a different amount of pollution. The government decides that polluting firms must buy pollution permits that cost $90 each. Each permit allows the firm to emit 1 tonne of pollution. No pollution can be emitted without a permit. Which method of production has least total cost?
- Acost of production 320, pollution caused 3
- Bcost of production 380, pollution caused 2
- Ccost of production 480, pollution caused 1
- Dcost of production 700, pollution caused 0
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Correct answer: B. cost of production 380, pollution caused 2
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