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Figure: City with Two Polluters
-(Figure: City with Two Polluters) Look at the figure City with Two Polluters. If the government imposed an emissions tax of $400, firm A would produce _____ tons of emissions and firm B would produce _____ tons of emissions.
A) 200; 400
B) 400; 1,200
C) 800; 1,400
D) 1,200; 1,600

Question

Use the following to answer questions:
Figure: City with Two Polluters 
-(Figure: City with Two Polluters) Look at the figure City with Two Polluters. If the government imposed an emissions tax of $400, firm A would produce _____ tons of emissions and firm B would produce _____ tons of emissions.
A) 200; 400 
B) 400; 1,200 
C) 800; 1,400 
D) 1,200; 1,600

Quizplus · Accepted Answer

An emissions tax of $400 would lead each firm to reduce emissions until the marginal cost of abatement equals the tax. Firm A would produce 400 tons and Firm B would produce 1,200 tons, as these are the levels where their marginal abatement costs equal $400.

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