The figure below shows the marginal pollution abatement cost curves of two firms- Company X and Company Y.

-Refer to the figure above. If the government sets a pollution cap of 30 tons of emission per firm, Company Y will incur an abatement cost of ________.

Question

The figure below shows the marginal pollution abatement cost curves of two firms- Company X and Company Y.
 
-Refer to the figure above. If the government sets a pollution cap of 30 tons of emission per firm, Company Y will incur an abatement cost of ________.

Quizplus · Accepted Answer

To find the abatement cost for Company Y at a pollution cap of 30 tons, we need to calculate the difference between the cost of abating to the cap level from their initial pollution level. Company Y initially pollutes 50 tons and needs to reduce to 30 tons, a reduction of 20 tons. Looking at the cost curve for Company Y, reducing pollution by 20 tons (from 50 to 30 tons) incurs a cost of $3,000.

The Figure Below Shows the Marginal Pollution Abatement Cost Curves