There are two plants in an industry.To reduce pollution,the government has imposed environmental standards forcing each plant to cut emissions by 60%.At the emissions standard,the marginal social benefit of pollution for plant A is $500,and the marginal social benefit of pollution for plant B is $125.The same level of pollution can be achieved at a lower cost by:
A)forcing plant A to reduce emissions and allowing plant B to increase emissions.
B)allowing plant A to pollute more and requiring plant B to pollute less.
C)forcing both plants to reduce emissions.
D)allowing both plants to pollute more.

Question

Quizplus · Accepted Answer

The marginal social benefit of pollution is higher for plant A ($500) than for plant B ($125), indicating that the cost of reducing pollution is lower for plant B. Therefore, allowing plant A to pollute more (because it's more costly for them to reduce emissions) and requiring plant B to pollute less (because it's less costly for them to reduce emissions) achieves the same level of pollution reduction at a lower overall cost.

There Are Two Plants in an Industry