The Diagram Below Shows the Marginal Cost of Pollution Abatement

question 6

Multiple Choice

The diagram below shows the marginal cost of pollution abatement for two firms,Firm X and Firm Y.
FIGURE 17- 4
-Refer to Figure 17- 4.Ignore the horizontal line at t.If the government wanted to impose an emissions tax,efficiency requires that it

• A)choose a different tax rate for each firm so that each firm abates QR units of pollution.
• B)levy a tax at the same rate to both firms.
• C)tax only the low- cost firm (Firm
• X)and fix the amount of pollution abatement for the high- cost firm (Firm
• Y).
• D)tax only the high- cost firm (Firm
• Y)and fix the amount of pollution abatement for the low- cost firm (Firm
• X).
• E)impose the same tax on both firms and also fix the amount of pollution abatement at QR for each firm.

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Definitions:

Statement of Stockholders' Equity

A financial report detailing changes in the equity section of the balance sheet, including shares, dividends, and earnings over a period.

Closing Entry

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts.

Retained Earnings

The portion of net income left over for the business after it has paid out dividends to its shareholders.

Retained Earnings

The portion of net earnings not paid out as dividends but retained by the company to be reinvested in its core business or to pay debt.