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 Q3 units of pollution.If the government imposes an emissions tax of $20 per unit of emissions,
A) neither firm will abate any pollution.
B) Firm 1 will abate less than Q3,and Firm 2 will not abate any pollution at all.
C) Firm 1 and Firm 2 will each increase abatement beyond Q3.
D) Firm 1 will increase abatement beyond Q3 and Firm 2 will abate less than Q3.
E) the level of pollution abatement will be optimal.
Correct Answer:
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