A firm that generates pollution is illustrated in Figure 9.7. If the government imposes a pollution tax equal to P2 and the firm chooses abatement level A3:
A. the marginal cost of abating is greater than the marginal benefit of abating.
B. the marginal benefit of abating is greater than the marginal cost of abating.
C. the firm is choosing optimally.
D. the firm is in violation of environmental protection laws.
Answer: A
Economics
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