Two Farmers, a and B, Each Apply 100 Tons of Manure

Multiple Choice

Two farmers, A and B, each apply 100 tons of manure on their fields. To reduce manure runoff, the government has decided to require a permit for each ton of manure applied. The government gives each farmer 50 permits. Farmer A incurs losses of $25 for each ton of manure he does not apply, and Farmer B incurs losses of $50 for each ton of manure he does not apply. What is the total cost of reducing runoff if firms are not allowed to buy and sell permits from each other? What is the total cost of reducing runoff if the firms are allowed to buy and sell permits from each other?

A) ​$3,750; $2,500
B) ​$2,500; $3,750
C) ​$5,000; $2,500
D) $3,750; $3,750