Top Posters
Since Sunday
5
o
5
4
m
4
b
4
x
4
a
4
l
4
t
4
S
4
m
3
s
3
New Topic  
nakungth nakungth
wrote...
Posts: 1175
Rep: 3 0
6 years ago
A paper company dumps nondegradable waste into a river that flows by the firm's plant.  The firm estimates its production function to be:
   Q = 6KW,
 where Q = annual paper production measured in pounds, K = machine hours of capital, and W = gallons of polluted water dumped into the river per year.  The marginal products of capital and labor are given as follows:
   MPK = 6W   MPW = 6K       
The firm currently faces no environmental regulation in dumping waste into the river.  Without regulation, it costs the firm $7.50 per gallon dumped.  The firm estimates a $30 per hour rental rate on capital.  The operating budget for capital and waste water is $300,000 per year.

a.   Determine the firm's optimal ratio of waste water to capital.
b.   Given the firm's $300,000 budget, how much capital and waste water should the firm employ?  How much output will the firm produce?
c.   The state environmental protection agency plans to impose a $7.50 effluent fee for each gallon that is dumped.  Assuming that the firm intends to maintain its pre-fee output, how much capital and waste water should the firm employ?  How much will the firm pay in effluent fees?  What happens to the firm's cost as a result of the effluent fee?
Textbook 
Microeconomics

Microeconomics


Edition: 8th
Author:
Read 173 times
2 Replies
Replies
Answer verified by a subject expert
boransalboransal
wrote...
Posts: 477
6 years ago
Sign in or Sign up in seconds to unlock everything for free
More solutions for this book are available here
This verified answer contains over 340 words.
1

Related Topics

nakungth Author
wrote...
5 years ago
Thank you!
New Topic      
Explore
Post your homework questions and get free online help from our incredible volunteers
  595 People Browsing
 114 Signed Up Today
Related Images
  
 48199
  
 245
  
 656
Your Opinion
Which country would you like to visit for its food?
Votes: 204