The Diagram Below Shows the Marginal Costs of Pollution Abatement

question 10

Multiple Choice

The diagram below shows the marginal costs of pollution abatement for two firms,Firm 1 and Firm 2.
FIGURE 17-5
-Refer to Figure 17-5.Suppose the government requires that each firm abate pollution to the level Q 3.The outcome would be efficient because

• A)the marginal costs of abatement are equated for the two firms.
• B)the maximum amount of pollution is being abated at the lowest cost.
• C)the marginal cost and marginal benefit of pollution abatement are equated.
• D)all of the above.
• E)none of the above; the outcome would be inefficient.

Analyze the consequences of changes in market supply and demand elasticity on surplus.

Interpret graphical representations of market models to identify areas representing consumer and producer surplus, as well as deadweight loss.

Understand the concept of deadweight loss and its occurrence due to market distortions.

Grasp the principles of welfare economics related to market efficiency and government intervention.

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