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

420 tonnes

640 tonnes

6000$

3200$

4800$

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