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Home Q & A Board Other Fields Homework Help Business Economics
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gisellerol gisellerol
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A year ago

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

Short description: Two abatements versus cost graphs are plotted, comparing two firms numbered Firm 1 and Firm 2. Long description: In both graphs, the horizontal axis denotes abatement, ranging from Q subscript 1 through 7 in increments of 1. The vertical axis denotes dollars ranging from 0 to 60 in increments of 10. Firm 1: an increasing line M C subscript 1 is drawn starting at (0, 10), with a point marked. The point is (Q subscript 3, 30). Firm 2: an increasing line M C subscript 2 is drawn starting at (0, 30). The point marked on the line is (Q subscript 3, 50).

FIGURE 17-5

Refer to Figure 17-5. Suppose each firm is currently abating pollution to the level Q3. Which of the following statements is true?



▸ This outcome is not allocatively efficient because less than 100% abatement is being achieved.

▸ This outcome is not productively efficient because the total cost of achieving this level of abatement is not minimized.

▸ This outcome is not productively efficient because one firm is abating more pollution than the other.

▸ This outcome is efficient because both firms are abating the same amount.

▸ This outcome is not allocatively efficient because the marginal benefits and marginal costs of abatement are not equated.
Textbook 
Microeconomics

Microeconomics


Edition: 17th
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coconut122coconut122
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