1 3. A steel firm produces jointly steel and pollution. The pollution adversely affects anearby fishery. Both firms are price-takers. ps is the market price of steel. PF is themarket price of fish. Cs(s, x) is the steel firm's cost of producing s units of steeljointly with x units of pollution. CF(f,x) is the cost to the fishery of catching funits of fish when the steel mill emits x units of pollution. Suppose the steel firm doesnot face any of the external costs of its pollution production.(a) Write down the profit functions, and the first-order profit-maximization conditionsfor the two firms.14, cs(s, x) = s² + (x – 5)² , and CF(f,x) = f + fx .Suppose psPlease answer the following questions.10, Pf =(b) Derive the output level of the two firms.(c) Suppose the fishery firm owns the water and can sell pollution rights at px each.What is the equilibrium price and equilibrium quantity for pollution rights traded?(d) Suppose the two firms merge to become one. What is the highest profit this newfirm can achieve?

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3. A steel firm produces jointly steel and pollution. The pollution adversely affects a nearby fishery. Both firms are price-takers. p, is the market price of steel. Pf is the market price of fish. Cs(s,x) is the steel firm's cost of producing s units of steel jointly with x units of pollution. CF(f,x) is the cost to the fishery of catching f units of fish when the steel mill emits x units of pollution. Suppose the steel firm does not face any of the external costs of its pollution production.

3. A steel firm produces jointly steel and pollution. The pollution adversely affects a nearby fishery. Both firms are price-takers. p, is the market price of steel. Pf is the market price of fish. Cs(s,x) is the steel firm's cost of producing s units of steel jointly with x units of pollution. CF(f,x) is the cost to the fishery of catching f units of fish when the steel mill emits x units of pollution. Suppose the steel firm does not face any of the external costs of its pollution production.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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