The diagram below shows the marginal cost of pollution abatement for two firms,Firm X and Firm Y.
FIGURE 17-6
-Refer to Figure 17-6.There is an emissions tax of $ t per unit of pollution.The resulting amount of pollution abatement is socially optimal if

Question

The diagram below shows the marginal cost of pollution abatement for two firms,Firm X and Firm Y.
  FIGURE 17-6
-Refer to Figure 17-6.There is an emissions tax of $ t per unit of pollution.The resulting amount of pollution abatement is socially optimal if

Quizplus · Accepted Answer

The socially optimal amount of pollution abatement occurs when the emissions tax is equal to the marginal social cost of pollution. This aligns the private cost of pollution (including the tax) with its social cost, leading firms to choose the level of pollution (or abatement) that reflects the true cost of their actions to society.

The Diagram Below Shows the Marginal Cost of Pollution Abatement