Answer the following statement(s) true (T) or false (F)

1. According to the textbook application, the United States pays a higher tax rate on gasoline than any nation in the European Union (EU).
2. If firm 1 and firm 2 each face an marginal abatement cost of MAC1 = 5A1 and MAC2 = 3A2, respectively, and if the combined abatement level must be 16 units, then firm 1 must abate 6 units and firm 2 must abate 10 units in order to achieve the cost-effective solution.
3. Suppose that for some abatement equipment market, the MSB = 525 – 1.2Q and MPB = 325 – 0.8Q, then the Pigouvian subsidy for that market must equal 200 – 0.4Q at QE to achieve an efficient outcome.
4. Suppose that for some abatement equipment market, the MSB = 502 – 1.2Q, and MPB = 302 – 0.8Q, then the Pigouvian subsidy must equal 804 – 2Q at the efficient output level to achieve the efficient output level.
5. Compared to an abatement equipment subsidy, a per-unit subsidy on abatement might be less disruptive to the market because it is defined without any influence as to how abatement is achieved.


1. False
2. True
3. True
4. False
5. True

Economics

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