A firm that generates pollution is illustrated in Figure 9.7. If the government imposes a pollution tax equal to P1, the marginal benefit to the firm of abating A2 is:
A. P1.
B. P2.
C. P1 - P2.
D. P2 - P3.
Answer: A
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A. is an advantage that other business organizations do not enjoy. B. implies that stockholders earn higher returns to offset the tax disadvantage compared to other, similar financial assets. C. reduces the limited liability of corporations. D. only exists when corporations suffer losses.
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a. True b. False