Chapter 9 - Berck _ Helfand

Chapter 9 - Berck _ Helfand - Chapter 9. Supply In Chapter...

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Chapter 9. Supply In Chapter 8, we examined how a firm makes its input decisions. When some of those inputs result in pollution, then the input decisions also determine how much pollution there is for a specified amount of output. The total amount of emissions for a firm depends upon both the emissions for a specified output and the amount of output itself. In this chapter we examine the amount of output a firm decides to make. The connection between these two chapters is the cost curve we found at the end of Chapter 8, a relationship between the cost of production and the amount of output. While there are many models of firm behavior, this chapter focuses on the model that is used most, that of price-taking firms. This model, then, will help us understand More about a producer’s costs Profits and their role in a producer’s decision on how much to produce Opportunity costs and their role in producer (and consumer) decisions How production affects pollution, and how pollution reduction affects production. Paper Production Paper, although a vital input to a student’s academic process, rarely merits much attention, and even less thought is given to its origins. It is therefore unlikely that users of paper consider the byproducts of its production – the air and water pollution resulting from paper production. Paper production usually begins with harvesting wood from forests. Unlike for lumber production, where size of a tree matters for the size of boards that can come from it, the size of a tree is not important in the production of paper; all that matters is the volume of pulp that can be gotten from an area of trees. As a result, forests used for pulp production may have only young trees and will have different ecological characteristics than forests grown for lumber or forests left as wilderness. Once the wood is harvested, paper mills combine the wood with chemicals to make pulp. The process often results in significant emissions to water and air. Water pollutants include biological and chemical oxygen demand – compounds that reduce the oxygen in water and therefore kill many forms of aquatic life. Air pollutants include greenhouse gases, nitrogen oxides and hydrocarbons (that contribute to smog), sulfur dioxide (which can acidify rain and snow), and others. 1 The leaking to the air of bleach used to whiten paper is particularly noticeable. The pulp is then made into paper. It’s possible to combine the inputs for this process into four categories: capital, labor, energy and materials. 2 In the U.S. in 1996, 17% of the costs of making paper were the capital costs -- what it costs (on a yearly basis) to provide the mill that makes wood into paper. The remaining 83% of costs were for labor (25%), energy (3%), and materials, largely wood (55%).
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This note was uploaded on 03/03/2009 for the course ECON 370 taught by Professor Helfand during the Winter '08 term at University of Michigan.

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Chapter 9 - Berck _ Helfand - Chapter 9. Supply In Chapter...

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