Two Firms,A and B,are Legally Required to Reduce Their Toxic

question 48

Multiple Choice

Two firms,A and B,are legally required to reduce their toxic emissions.If Firm A's marginal cost of abatement is $5 and Firm B's marginal cost of abatement is $5,

• A)their joint total cost of abatement is at a maximum.
• B)their joint total cost of abatement is at a minimum.
• C)Firm A should abate more and Firm B should abate less.
• D)Firm B should abate more and Firm A should abate less.
• E)the socially optimal joint level of abatement is not being achieved.

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Definitions:

Consumer Surplus

The difference between the total amount consumers are willing and able to pay for a good or service versus the total amount they actually pay.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive.

Price Ceiling

A government-imposed limit on how high a price can be charged for a product or service, often intended to protect consumers from excessive prices.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service and the actual amount they receive.