The diagram below shows the marginal costs of pollution abatement for two firms,Firm 1 and Firm 2. FIGURE 17-5
-Refer to Figure 17-5.Suppose Firm 1 and Firm 2 are each abating Q₃units of pollution.If the government imposes an emissions tax of $20 per unit of emissions,

Question

The diagram below shows the marginal costs of pollution abatement for two firms,Firm 1 and Firm 2.

FIGURE 17-5
-Refer to Figure 17-5.Suppose Firm 1 and Firm 2 are each abating Q₃units of pollution.If the government imposes an emissions tax of $20 per unit of emissions,

Quizplus · Accepted Answer

With an emissions tax of $20 per unit, the marginal cost of abatement for both firms is $20. For Firm 1, this is higher than the marginal benefit of abatement at Q3, so it will abate less than Q3. For Firm 2, the marginal cost of abatement is also $20, but the marginal benefit of abatement is zero at Q3, so it will not abate any pollution at all.

The Diagram Below Shows the Marginal Costs of Pollution Abatement