Refer to the Information in Figure 16

question 26

Multiple Choice

Refer to the information in Figure 16.5 below to answer the question(s) that follow. Figure 16.5
Figure 16.5 shows the marginal benefits of emitting pollution for the only two chemical companies in an industry, Alpha Chemicals and Beta Chemicals. Before any tax on pollution emissions is imposed, each company views pollution as being free.
-Refer to Figure 16.5. Suppose that instead of a tax, the government uses standards to achieve the emission reductions, requiring that each company cut its original emissions in half rather than allowing each company to choose emissions based on their costs. Compared to the situation under the tax, Alpha's emissions would ________ and Beta's emissions would ________.

• A) increase by 50 tons; decrease by 50 tons
• B) decrease by 50 tons; decrease by 50 tons
• C) increase by 25 tons; decrease by 25 tons
• D) decrease by 25 tons; increase by 25 tons

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Definitions:

Economic Life

The estimated period over which an asset is expected to be economically useful to the owner.

Sales-Type Lease

A lease agreement where the lessor recognizes profit or loss upfront due to the difference between the fair value of the asset and its carrying amount.

Initial Direct Costs

Expenses directly associated with obtaining or originating a financing lease, which are often deferred and amortized over the lease term.