Refer to the Figure above. The firm is facing an emissions charge of t and an abatement cost curve of MAC₁. If the firm is able to lower its abatement cost curve to MAC₂_,and it now faces an emissions standard of e₁, the firm will A) emit at level e₁ and save (d+e) B) emit at level e₁ and save (d) C) emit at level e₂ and save (c+d). D) emit at level e₁ and save (d+e).

Question

Quizplus · Accepted Answer

The firm will emit at the standard level e1 and save the area d, which represents the reduction in abatement costs due to the shift from MAC1 to MAC2.

Refer to the Figure Above