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Author Question: The diagram below shows the marginal cost of pollution abatement for two firms, Firm X and Firm ... (Read 52 times)

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The diagram below shows the marginal cost of pollution abatement for two firms, Firm X and Firm Y.



FIGURE 17-6

Refer to Figure 17-6. There is an emissions tax of $t per unit of pollution. The resulting amount of pollution abatement is socially optimal if


◦ the emissions tax causes no change in firms' polluting activity.
◦ each firm abates at QR.
◦ the emissions tax is equal to the marginal social cost of pollution.
◦ each firm pays the maximum amount of tax.
◦ Firm X abates QX and Firm Y abates QY.


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Marked as best answer by xxxxxxxxxxxx on Oct 12, 2022

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