Under what circumstances would a firm with more than one source of emissions minimize its total costs of abatement by setting abatement levels equal at each source?

Question

Quizplus · Accepted Answer

If each source has identical marginal abatement cost structures, it will be most cost-effective to set abatement levels equal at each source. This is because abating the same amount at each source will result in the same amount of total abatement, but because the marginal abatement costs are the same, the total cost of abatement will be minimized. In other words, the firm can achieve the same amount of abatement with the same cost per unit of abatement by setting equal abatement levels at each source. Option A is incorrect because this method may not always result in minimizing total abatement costs if the sources have different marginal cost or damage cost structures. Option B and D are also incorrect because having identical marginal cost or damage cost structures does not necessarily lead to the same marginal abatement costs.

Under What Circumstances Would a Firm with More Than One