In the multiple-polluter case, each firm faced with an emission charge implemented as a marginal tax (MT) abates up to the point where MAC equals MT, which results in a cost-effective solution.

Question

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When each firm faces an emission charge implemented as a marginal tax, it is true that each firm will abate up to the point where their marginal abatement cost (MAC) equals the marginal tax (MT). This results in a cost-effective solution for reducing emissions.

In the Multiple-Polluter Case, Each Firm Faced with an Emission