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.Firms X and Y have an emissions tax of $t imposed on each unit of pollution they produce.Firm X will choose to abate pollution of units and Firm Y will choose to abate pollution of units.

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.Firms X and Y have an emissions tax of $t imposed on each unit of pollution they produce.Firm X will choose to abate pollution of units and Firm Y will choose to abate pollution of units.

Quizplus · Accepted Answer

Firm X will choose to abate pollution until its marginal cost of abatement equals the tax, which occurs at point QX. Firm Y will choose to abate pollution until its marginal cost of abatement equals the tax, which occurs at point QY. Therefore, the best choice is QX for Firm X and QY for Firm Y, resulting in a total abatement of QX + QY, which is represented by point E.

The Diagram Below Shows the Marginal Cost of Pollution Abatement