Reference: Ref 16-3 Reference: Ref 16-2 Reference: Ref 16-1 6. Figure: Environme

Question

Reference: Ref 16-3

Reference: Ref 16-2

Reference: Ref 16-1

6. Figure: Environmental Standards versus Emissions Taxes

Reference: Ref 16-3

(Figure: Environmental Standards versus Emissions Taxes) In the figure Environmental Standards versus Emissions Taxes, if the goal is to limit the total emissions of the two firms, A and B, to 600 tons, the most efficient solution is an _____, and total pollution would be _____ tons. emissions tax; 600 environmental standard; 300 emissions tax; 200 environmental standard; 600

Explanation / Answer

6.

Correct Answer:

Emission Tax, 600

Explanation:

As per the above mentioned graph, it is the emission tax that will limit the total pollution by firm A and B to be 600 ton.

7.

Correct Answer

inefficient; MSB < MSC

Explanation:

Since, MSB is $300 and MSC is $500 at 5 tons of pollution production. Thus, it is an inefficient condition. Also, reason for inefficiency is the inequality between MSB and MSC. Here, MSB is lower than MSC.

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