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.If the government requires each firm to abate Q3 units of pollution,the social costs of this abatement

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.If the government requires each firm to abate Q3 units of pollution,the social costs of this abatement

Quizplus · Accepted Answer

The social costs of abatement would be minimized by allocating the abatement efforts according to the firms' marginal abatement costs. If Firm 1 can abate pollution at a lower cost than Firm 2, then having Firm 1 increase its abatement while Firm 2 reduces its abatement by the same amount would lower the overall costs of achieving the pollution reduction goal.

The Diagram Below Shows the Marginal Costs of Pollution Abatement