Suppose That There Are Two Firms, Each Generating Three Tons

question 19

Multiple Choice

Suppose that there are two firms, each generating three tons of SO₂. Suppose also that the government has set a target abatement level of two tons. Under a policy of uniform abatement with permits the firm with the lower marginal abatement cost

• A) will abate exactly the same amount of SO₂ as the firm with the higher marginal abatement cost.
• B) will abate less SO₂ than the firm with the higher marginal abatement cost.
• C) will abate more SO₂ than the firm with the higher marginal abatement cost.
• D) will sell its pollution permit to the firm with the higher marginal abatement cost.

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