Suppose there are only two manufacturers of in an area that and generate the same amount of carbon emission pollution per hour.The only difference is that firm 1 is a low cost firm and firm 2 is a high cost one.What would we expect if the government were to use a uniform abatement policy?
A)the demand for tires to increase
B)the quantity of tires produced to increase
C)The uniform abatement policy is likely to be inefficient.
D)The uniform abatement policy is likely to be efficient.

Question

Quizplus · Accepted Answer

A uniform abatement policy would require both firms to reduce their emissions by the same amount, regardless of the cost of doing so. This means that the high cost firm (firm 2) would face a greater burden to meet the abatement requirements, which could lead to higher prices for their products, lower production levels, or even exiting the market altogether. Meanwhile, the low cost firm (firm 1) would not face as much of a burden, which could give them an unfair advantage in the market. This could result in a shift in demand towards the low cost firm, which could lead to market inefficiencies such as higher prices and reduced output overall. Therefore, a uniform abatement policy is likely to be inefficient in this situation.

Suppose There Are Only Two Manufacturers of in an Area