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 Q3 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 Q3 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

At the optimal level of pollution, social marginal cost of pollution equals the emissions tax rate of $40 per unit. The optimal level of pollution is achieved when the total marginal cost of pollution abatement is equal to the emissions tax rate. In this case, both firms are abating at Q3 where the marginal cost of abatement for each firm equals $40 per unit of pollution. Therefore, the resulting level of pollution would be optimal.

The Diagram Below Shows the Marginal Costs of Pollution Abatement