The Diagram Below Shows the Marginal Cost of Pollution Abatement

question 44

Multiple Choice

The diagram below shows the marginal cost of pollution abatement for two firms,Firm X and Firm Y. FIGURE 17-6
-Refer to Figure 17-6.There is an emissions tax of $t per unit of pollution.Which of the following statements regarding the pollution abatement activities by the two firms is correct?

• A)It is not socially optimal to have Firm X doing pollution abatement of Q_X while Firm Y does the lesser amount,Q_Y.
• B)It is efficient for Firm Y to do less pollution abatement than Firm X because Firm Y faces higher costs of abatement.
• C)The emissions tax causes no change in the firms' polluting activity.
• D)The shaded areas in the two graphs depict the social costs of pollution caused by Firms X and Y.
• E)The emissions tax causes an optimal level of pollution.

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