The figure given below shows the demand and supply curves of automobiles.Figure 13.3
In the figure,
D: Demand curve of automobiles
S: Supply of automobiles prior to the tax
S+t: Supply of automobiles after the tax

-Suppose the current price of a marketable permit to emit one ton of sulfur dioxide is $100. If the marginal cost for a firm to reduce one ton of sulfur dioxide is $80, then:

Question

The figure given below shows the demand and supply curves of automobiles.Figure 13.3
In the figure,
D: Demand curve of automobiles
S: Supply of automobiles prior to the tax
S+t: Supply of automobiles after the tax
 
-Suppose the current price of a marketable permit to emit one ton of sulfur dioxide is $100. If the marginal cost for a firm to reduce one ton of sulfur dioxide is $80, then:

Quizplus · Accepted Answer

If the marginal cost for a firm to reduce one ton of sulfur dioxide is $80, and the current price of a marketable permit to emit one ton of sulfur dioxide is $100, then it is cheaper for the firm to reduce its emissions by one ton rather than buy a permit. Therefore, the firm will reduce its emissions of sulfur dioxide by one ton.

The Figure Given Below Shows the Demand and Supply Curves