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 imposes an emissions tax of $20 per unit of emissions,
A) Firm 1 will increase abatement beyond Q3 and Firm 2 will abate less than Q3.
B) Firm 1 and Firm 2 will each increase abatement beyond Q3.
C) the level of pollution abatement will be optimal.
D) Firm 1 will abate less than Q3, and Firm 2 will not abate any pollution at all.
E) neither firm will abate any pollution.
Correct Answer:
Verified
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