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 Q 3 units of pollution.If the government imposed an emissions tax of $40 per unit of emissions,and this tax rate was known to equal the social marginal cost of pollution,then we can predict with confidence that

Question

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 Q 3 units of pollution.If the government imposed an emissions tax of $40 per unit of emissions,and this tax rate was known to equal the social marginal cost of pollution,then we can predict with confidence that

Quizplus · Accepted Answer

When the emissions tax is equal to the social marginal cost of pollution, firms will abate pollution to the point where the cost of abatement equals the emissions tax. This will lead to the socially optimal level of pollution. In this case, both Firm 1 and Firm 2 will abate to Q3, leading to the socially optimal level of pollution. Therefore, the correct answer is (C) the resulting level of pollution would be socially optimal.

The Diagram Below Shows the Marginal Costs of Pollution Abatement