Suppose there are only two tire manufacturers in an area,and they generate the same amount of carbon emission pollution per hour.The only difference is that firm 1 is a low-cost firm and firm 2 is a high-cost firm.What would we expect if the government were to use a uniform abatement policy?
A) The demand for tires will increase.
B) The quantity of tires produced will increase.
C) The uniform abatement policy is likely to be inefficient.
D) The uniform abatement policy is likely to be efficient.

Question

Quizplus · Accepted Answer

A uniform abatement policy would require both firms to reduce their carbon emissions by the same amount, regardless of the cost. This approach would disproportionately affect the high-cost firm, as they would face greater costs to reduce emissions compared to the low-cost firm. This could lead to the high-cost firm facing higher costs of production, which could result in higher prices for consumers, lower profits for the firm, or both. This inefficiency suggests that the uniform abatement policy is not the best approach in this situation.

Suppose There Are Only Two Tire Manufacturers in an Area,and