The diagram below shows the marginal cost of abatement for each of two firms,A and B.Each firm is initially abating Q0 units of pollution.
FIGURE 17- 6
-Refer to Figure 17- 6.Suppose that a system of tradable pollution permits is introduced into this market and the equilibrium permit price is p*.Firm B will buy permits from Firm A because
A) Firm B has lower costs of pollution abatement than Firm A.
B) its total savings from abating less (areas 1+2+3) exceed the cost of buying the permits (areas 2+3) .
C) Firm B can buy the permits at a lower price than Firm A.
D) its total cost of abating less (areas 1+2+3) exceeds the cost of buying the permits (areas 2+3) .
E) its total savings from abating less (areas 1+2+3) exceed the total costs of Firm A abating more (area 6) .
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