Refer to the Figure above. Assume that a firm is facing MAC₁ and an emissions standard of e₂. What is the firm's reduction in compliance costs in obtaining the emission standard of e₂ if the firm is successful in reducing abatement costs from MAC₁ to MAC₂? A) a B) (e+d+c) C) (a+b+c+d) D) (a+b)

Question

Quizplus · Accepted Answer

The reduction in compliance costs is equal to the area between MAC1 and MAC2, which is equal to (a).

Refer to the Figure Above