The Diagram Below Shows the Marginal Costs of Pollution Abatement

Multiple Choice

The diagram below shows the marginal costs of pollution abatement for two firms,Firm 1 and Firm 2. FIGURE 17-5
-Refer to Figure 17-5.Suppose Firm 1 and Firm 2 are each abating Q₃ units of pollution.If the government imposed an emissions tax of $40 per unit of emissions,and this tax rate was known to equal the social marginal cost of pollution,then we can predict with confidence that

A) each firm would abate to Q₃.
B) each firm would abate to the same level.
C) the resulting level of pollution would be socially optimal.
D) Firm 2 would increase abatement beyond Q₃ and Firm 1 would abate less than Q₃.
E) Firm 2 would increase its emissions and this would not be socially optimal.