Refer to the information in Figure 16.5 below to answer the question(s) that follow. Figure 16.5
Figure 16.5 shows the marginal benefits of emitting pollution for the only two chemical companies in an industry, Alpha Chemicals and Beta Chemicals. Before any tax on pollution emissions is imposed, each company views pollution as being free.
-Refer to Figure 16.5. Suppose that instead of a tax, the government uses standards to achieve the emission reductions, requiring that each company cut its original emissions in half rather than allowing each company to choose emissions based on their costs. Compared to the outcome under the tax, this common standard would result in
A) Alpha gaining more than Beta loses.
B) Alpha gaining less than Beta loses.
C) Beta gaining more than Alpha loses.
D) Beta gaining less than Alpha loses.

Question

Refer to the information in Figure 16.5 below to answer the question(s) that follow.  Figure 16.5
Figure 16.5 shows the marginal benefits of emitting pollution for the only two chemical companies in an industry, Alpha Chemicals and Beta Chemicals. Before any tax on pollution emissions is imposed, each company views pollution as being free.
-Refer to Figure 16.5. Suppose that instead of a tax, the government uses standards to achieve the emission reductions, requiring that each company cut its original emissions in half rather than allowing each company to choose emissions based on their costs. Compared to the outcome under the tax, this common standard would result in
A) Alpha gaining more than Beta loses. 
B) Alpha gaining less than Beta loses. 
C) Beta gaining more than Alpha loses. 
D) Beta gaining less than Alpha loses.

Quizplus · Accepted Answer

Under a common standard requiring each company to cut emissions in half, Alpha, which has lower costs for reducing emissions, would gain less because it is not able to take advantage of its lower costs to the same extent. Beta, with higher costs for reducing emissions, would lose more because it is forced to reduce emissions by the same proportion as Alpha, despite its higher costs. This results in Alpha gaining less than Beta loses.

Refer to the Information in Figure 16