A) X is the optimal choice as it dominates all other choices.B) If abatement became cheaper due to technological advancements, then the feasible set would expand upwards, leading to a choice of a policy with a higher level of abatement.C) If the citizens cared more about the environment then the indifference curves will be steeper, and therefore they will choose a policy with a higher level of abatement.D) The economy should choose point B above point X, as at B the marginal productivity of abatement expenditure is higher than its opportunity cost. The figure shows the choice of the abatement level, using the economy'sfeasible set and the citizens' indifference curves for consumption and quality ofenvironment. The lower diagram shows the MRT and MRS curves (NB theseare not shown explicitly in Figure 20.14 in The Economy). Based on thisinformation, which of the following statements is correct?100-Feasible frontierCitizen's indifference curves|(slope = MRT)(slope = MRS)Maximum level ofconsumption,zero abatementE*62-Feasible setE with zeroabatementAbatement costsA"Marginalproductivity ofabatementexpenditure (MRT)Opportunity cost ofabatement (MRS)450500Consumption of goods and services (€bn)Quality of the environment (E)

Environmental economics is a branch of economics which includes discussion about efficient policies…

Answered: The figure shows the choice of the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A) X is the optimal choice as it dominates all other choices.

B) If abatement became cheaper due to technological advancements, then the feasible set would expand upwards, leading to a choice of a policy with a higher level of abatement.

C) If the citizens cared more about the environment then the indifference curves will be steeper, and therefore they will choose a policy with a higher level of abatement.

D) The economy should choose point B above point X, as at B the marginal productivity of abatement expenditure is higher than its opportunity cost.

The figure shows the choice of the abatement level, using the economy's
feasible set and the citizens' indifference curves for consumption and quality of
environment. The lower diagram shows the MRT and MRS curves (NB these
are not shown explicitly in Figure 20.14 in The Economy). Based on this
information, which of the following statements is correct?
100-
Feasible frontier
Citizen's indifference curves
|(slope = MRT)
(slope = MRS)
Maximum level of
consumption,
zero abatement
E*62-
Feasible set
E with zero
abatement
Abatement costs
A"
Marginal
productivity of
abatement
expenditure (MRT)
Opportunity cost of
abatement (MRS)
450
500
Consumption of goods and services (€bn)
Quality of the environment (E)

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