This diagram shows the costs incurred by firm A and firm B as they reduce the pollution from their factories.MACA represents the marginal abatement cost for firm A and MACB represents the marginal abatement cost for firm B.
-Refer to the diagram above.Suppose that the government imposes a tax of $200 per tonne of pollution per day.As a result,firm A will reduce pollution by _______ tonne(s)per day and firm B will reduce pollution by _________ tonne(s)per day.
A) 1;3
B) 3;1
C) 2;6
D) 6;2
E) 3;3

Question

This diagram shows the costs incurred by firm A and firm B as they reduce the pollution from their factories.MACA represents the marginal abatement cost for firm A and MACB represents the marginal abatement cost for firm B.
-Refer to the diagram above.Suppose that the government imposes a tax of $200 per tonne of pollution per day.As a result,firm A will reduce pollution by _______ tonne(s)per day and firm B will reduce pollution by _________ tonne(s)per day.
A) 1;3 
B) 3;1 
C) 2;6 
D) 6;2 
E) 3;3

Quizplus · Accepted Answer

With the $200 tax imposed, both firms will reduce their pollution until their MAC equals $200. At this point, Firm A will have reduced pollution by 2 tonne(s)per day and Firm B will have reduced pollution by 6 tonne(s)per day, as shown by the intersection of their respective MAC curves with the horizontal line at $200. Therefore, the answer is Choice C: 2;6.

This Diagram Shows the Costs Incurred by Firm a and Firm