Figure 3A

-Refer to Figure 3A. Assume that one starts at any point that indicates an optimal pollution level. Further assume that there is a technological advancement that shifts the marginal
damage cost downward and to the right. The new optimal level of pollution will be at which
point?
A) Point "V", panel (a)
B) Point "G", panel (c)
C) Point "S", panel (b)
D) Point "R", panel (a)
E) Point "F", panel (c)

Question

Figure 3A
   
-Refer to Figure 3A. Assume that one starts at any point that indicates an optimal pollution level. Further assume that there is a technological advancement that shifts the marginal
 damage cost downward and to the right. The new optimal level of pollution will be at which
 point?
A) Point "V", panel (a) 
B) Point "G", panel (c) 
C) Point "S", panel (b) 
D) Point "R", panel (a) 
E) Point "F", panel (c)

Quizplus · Accepted Answer

When the marginal damage cost shifts downward and to the right, it indicates that the damage from pollution has decreased for each level of pollution, or that it takes more pollution to cause the same level of damage as before. This shift allows for a higher level of pollution to be optimal since the cost of pollution per unit is lower. Point "G" in panel (c) would represent a new equilibrium where the marginal cost of pollution control (or abatement) equals the new, lower marginal damage cost, thus indicating a new optimal level of pollution.

Figure 3A -Refer to Figure 3A. Assume That One Starts at Any