Refer to the Figure above If this firm were to consider the difference between an emission tax of t* or an emissions standard of e*, what would the firm conclude is the monetary difference between the two programs?
A) The emissions standard costs less than the taxation program by the amount of (a+b+c+d).
B) The emissions standard costs more than the taxation program by the amount of (a+b+c+d).
C) There is no monetary difference between the two programs.
D) There is not enough information to determine the difference between the two programs.

Question

Quizplus · Accepted Answer

The emissions standard costs less than the taxation program by the amount of (a+b+c+d) because the firm saves on tax payments for emissions reduced beyond the standard level.

Refer to the Figure Above If This Firm Were to Consider