Question

A large electric utility company spews million tons of greenhouse gases​ (mostly carbon​ dioxide) into the environment each year. This company has committed to spending ​$ billion in capital over the next five years to reduce its annual emissions by ​%. More will be spent after five years to reduce greenhouse gases further. a. What is the implicit cost of a ton of greenhouse​ gas? b. If the United States produces billion tons of greenhouse gases each​ year, how much capital must be spent to reduce total emissions by ​% over the next five years based on your answer in Part​ (a)?

Answer 1

Answer:

a. $537.31 per ton

b. $64,477,200,000

Explanation:

a. 5% of 67 million tons will cost $1.8 billion to be reduced.

The implicit cost of a ton therefore is;

= 1,800,000,000 / (5% * 67,000,000)

= 1,800,000,000/ 3,350,000

= $537.31 per ton

b. The amount to be spent to reduce 4 billion tons by 3% is;

= 537.31 * (4,000,000,000 * 3%)

= $64,477,200,000