Refer to the Figure above. If the firm above did not face emissions charges but instead, faced an emission standard of e*, abatement costs would be equal to ____________.
A) (b+d+e+f)
B) (e)
C) (a+b+c+d)
D) (b+d+e)

Question

Quizplus · Accepted Answer

If the firm faced an emission standard of e*, they would need to reduce their emissions to e*. Therefore, their abatement costs would only be equal to e, the cost to reduce emissions to e*. The rest of the diagram (a, b, c, d, and f) would not be relevant in this scenario.

Refer to the Figure Above