The Diagram Below Shows the Marginal Costs of Pollution Abatement

question 107

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 Firm 1 and Firm 2 are each abating Q 3 units of pollution.If the government imposes an emissions tax of $20 per unit of emissions,

• A)Firm 1 will abate less than Q3,and Firm 2 will not abate any pollution at all.
• B)neither firm will abate any pollution.
• C)the level of pollution abatement will be optimal.
• D)Firm 1 will increase abatement beyond Q3 and Firm 2 will abate less than Q3.
• E)Firm 1 and Firm 2 will each increase abatement beyond Q 3.

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Definitions:

Dividend Yield

A ratio indicating the annual dividend payment by a corporation in comparison to its stock price.

Dividend Growth Model

A valuation method used to estimate the worth of a stock by assuming that dividends grow at a constant rate indefinitely.

Market Price

The current value at which an asset or service can be bought or sold in the open market.

Declared Dividends

The announcement by a company's board of directors of the payment of a dividend to shareholders at a future date.