Suppose That There Are Three Power-Generating Plants,all of Which Generate

question 137

Multiple Choice

Suppose that there are three power-generating plants,all of which generate emissions.The table summarizes the cost of emission reduction for each firm given five different levels of pollution: $\begin{array}{lllllr}\text { Tons of smoke emitted per day } & 4 & 3 & 2 & 1 & 0 \\\text { Total abatement cost, firm A } & 0 & \$ 14 & \$ 30 & \$ 50 & \$ 75 \\\text { Total abatement cost, firm B } & 0 & \$ 20 & \$ 45 & \$ 80 & \$ 120 \\\text { Total abatement cost, firm C } & 0 & \$ 25 & \$ 60 & \$ 100 & \$ 150\end{array}$
In general,all three firms face _____ costs of abatement,suggesting that the principle of _____ applies to pollution abatement.

• A) increasing marginal;low-hanging-fruit
• B) excessive;cost-benefit
• C) high;adverse selection
• D) decreasing average;economies of scale

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Definitions:

Monopsony Power

The market power held by a single buyer, allowing them to dictate prices to sellers due to a lack of competition.

Monopoly Power

The ability of a monopolist to significantly control market price and exclude competitors by owning a majority of the market share.

Demand Function

A mathematical relationship expressing the quantity of an item demanded at various prices.

Marginal Costs

The amount spent to produce a further unit of a good or service.