Different marginal abatement cost

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Reference no: EM133629800

Question

There are 60 firms in the cement industry. All firms emit the same amount of pollution, but each firm has a different marginal abatement cost. Suppose the government wishes to bring down pollution from the cement industry by 10%. The government is considering two possible proposals: (i) require each firm to reduce pollution by 10% (ii) rank all firms by their MAC, and require the 30 firms with the lowest marginal abatement cost to each reduce pollution by 20%. Which (if any) of these proposals will result in the socially efficient outcome? Briefly explain your answer.

Reference no: EM133629800

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