The Diagram Below Shows the Marginal Costs of Pollution Abatement

question 118

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 imposed an emissions tax of $40 per unit of emissions,

• A)each firm would abate to Q3.
• B)each firm would abate to the same level.
• C)Firm 1 would increase abatement beyond Q3 and Firm 2 would abate less than Q3.
• D)Firm 2 would increase abatement beyond Q3 and Firm 1 would abate less than Q3.
• E)the level of pollution would be optimal.

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Definitions:

Budget Constraint

The limitations on the consumption choices of an individual or family based on their income and the prices of goods and services.

Hamburgers

A popular food item typically consisting of a cooked patty of ground meat placed inside a sliced bun.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision. It represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Budget Constraint

The limit on the consumption bundles that a consumer can afford given their income and the prices of goods and services.