The Government of Yokuku considers applying one of the following policies: a tax or a standard, in order to reduce pollution level from P to Po. The government economist drew the following graph, representing the marginal abatement cost (MAC) to the polluters, the marginal damage to the society (MD), the optimal tax level (Tax level) and the socially optimal pollution level (Po).

 

1.1 What is the total abatement cost to the polluter under the tax policy? 

1. A
2. B
3. A+B
4. A+B+C

1.2 What is the total abatement cost to the polluter under the standard policy? 

1. A
2. B
3. A+B
4. A+B+C

 

1.3 What is the total damage cost under the tax policy? 

1. A
2. B
3. A+B
4. A+B+C

 

Transcribed Image Text:

MAC MD Taxlevel B A Pollution level Po P Unregulated Pollution level MAC MD Taxlevel B A Pollution level Po P Unregulated Pollution level