Figure 9.7
-A firm that generates pollution is illustrated in Figure 9.7. If the government imposes a pollution tax equal to P₃ the firm's abatement choice will be
A) A₁.
B) A₂.
C) A₃.
D) less than A₁.

Question

Figure 9.7
-A firm that generates pollution is illustrated in Figure 9.7. If the government imposes a pollution tax equal to P₃ the firm's abatement choice will be
A) A₁. 
B) A₂. 
C) A₃. 
D) less than A₁.

Quizplus · Accepted Answer

The firm will choose the abatement level where the marginal cost of abatement equals the pollution tax. At P₃, this occurs at A₁.

Figure 9.7 -A Firm That Generates Pollution Is Illustrated in Figure 9.7