Consider Two Firms,A and B,that Must Engage in Pollution Abatement

question 14

Multiple Choice

Consider two firms,A and B,that must engage in pollution abatement.If Firm A has a lower marginal cost of pollution abatement than Firm B,then

• A)regardless of costs,it is equitable for both firms to face the same direct controls on their pollution.
• B)reallocating all abatement activity to Firm A will reduce pollution and reduce the total cost of abatement.
• C)reallocating some of Firm A's abatement activity to Firm B will keep total abatement constant but will reduce the total cost of abatement.
• D)reallocating some of Firm B's abatement activity to Firm A can keep total abatement constant but reduce the total cost of abatement.
• E)Firm B should lower its costs.

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Definitions:

Dominant Strategy Equilibrium

Dominant strategy equilibrium exists in a strategic game when each player has a strategy that yields the highest payoff regardless of the strategies chosen by other players.

Swerve

The act of suddenly changing direction, often to avoid a collision or obstacle.

Not Swerve

A term used in game theory, typically referring to a situation where players in a game or dilemma choose not to change their strategy or direction despite potential conflict.

Nash Equilibrium

A concept in game theory where no player can benefit by changing strategies while the other players keep theirs unchanged.