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Revenue = tax * quantity emitted<br />
R = $93 1<br />
/pound * 16 1/3 pounds = $1,524.44<br />
3<br />
This is the pink-shaded region on the graph (the polluters pay the tax on the quantity that<br />
they don’t abate)<br />
d) Assuming the same tax is imposed as in part (b), how much is spent by the industry on<br />
emissions abatement? Show this area shaded on the graph in part (a).<br />
Abatement Cost = ½ (18 2/3)(93 1/3) = $871.11<br />
This is the blue-shaded region on the graph<br />
13
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