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, 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
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.
The leaking to the air of bleach used to whiten paper is particularly
The pulp is then made into paper.
It’s possible to combine the inputs for this process into four categories:
energy and materials.
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.
remaining 83% of costs were for labor (25%), energy (3%), and materials, largely wood (55%).