The diagram below shows the marginal cost of pollution abatement for two firms,Firm X and Firm Y.
FIGURE 17- 4
-Refer to Figure 17- 4.Ignore the horizontal line at t.If the government wanted to impose an emissions tax,efficiency requires that it

Question

The diagram below shows the marginal cost of pollution abatement for two firms,Firm X and Firm Y.
  FIGURE 17- 4
-Refer to Figure 17- 4.Ignore the horizontal line at t.If the government wanted to impose an emissions tax,efficiency requires that it

Quizplus · Accepted Answer

Efficiency requires that the government levy a tax at the same rate to both firms, as this ensures that each firm will abate pollution up to the point where their marginal abatement cost equals the tax rate, leading to a cost-effective allocation of abatement efforts.

The Diagram Below Shows the Marginal Cost of Pollution Abatement