The figure below shows the marginal control costs for the only two firms in an i

Question

The figure below shows the marginal control costs for the only two firms in an industry. The government has determined that emissions need to be reduced by 20 tons.

The efficient allocation of pollution is for firm 1 to reduce emissions by________?? tons and firm 2 to reduce emissions by______? tons.

The tax rate (pollution charge) that would lead to the efficient allocation of pollution is $_________ ??However, a tax rate of $7 per ton would result in firm 1 reducing pollution by_________? tons and firm 2 reducing pollution by______?tons.

Explanation / Answer

14/3

20-14/3

For the last 2 parts, please follow this link: http://www2.econ.iastate.edu/classes/econ380/zhao/ch10.pdf

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