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Consider two sources of pollution, Firm A and Firm B, that are based in two different locations
Consider two sources of pollution, Firm A and Firm B, that are based in two different locations. Away (but not too far away) from these firms is the location of a receptor, City X. In the considered scenario, the following must be true for the equimarginal principle to hold: Group of answer choices
A) The firms' marginal savings from emission control, minus the associated transfer coefficients, must be equal to each other
B) The firms' marginal savings from emission control must be equal to the marginal damages from emission in the city
c) None of these
D)The firms' marginal savings from emission control, divided by the associated transfer coefficients, must be equal to each other
E) The firms' marginal savings from emission control, plus the associated transfer coefficient, must be equal to each other
Expert Solution
Answer - Option D
The firms marginal savings from emmisions divided by the associated transfer coefficients must be equal to one other
This option states the correct equimarginal principle where the marginal rate has to be divided by the cost or price. Just equating the marginal savings will not work. Hence Option D will only be correct.
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