- Refer to Figure 28.2.Assume this firm initially has marginal costs equal to Private MC₁ and is polluting.If the government decides to use emission charges to reduce pollution,the firm's MC curve will shift to

Question

- Refer to Figure 28.2.Assume this firm initially has marginal costs equal to Private MC<sub>1</sub> and is polluting.If the government decides to use emission charges to reduce pollution,the firm's MC curve will shift to A) MC<sub>3</sub> and the rate of output will decrease. B) MC<sub>3</sub> and the rate of output will increase. C) MC<sub>2</sub> and the rate of output will decrease.

Quizplus · Accepted Answer

An emission charge increases the firm's marginal costs by the amount of the charge, shifting the MC curve upward. This will lead to a decrease in the rate of output.