Refer to Figure 16.5. Suppose that instead of a tax, the government uses standards to achieve the emission reductions, requiring that each company cut its original emissions in half rather than allowing each company to choose emissions based on their costs. Compared to the outcome under the tax, this common standard would result in

A) Alpha gaining more than Beta loses.
B) Alpha gaining less than Beta loses.
C) Beta gaining more than Alpha loses.
D) Beta gaining less than Alpha loses.

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Zybrea Knight · Accepted Answer

Final Answer : B, Explanation :  Under a common standard requiring each company to cut emissions in half, Alpha, which has lower costs for reducing emissions, would gain less because it is not able to take advantage of its lower costs to the same extent. Beta, with higher costs for reducing emissions, would lose more because it is forced to reduce emissions by the same proportion as Alpha, despite its higher costs. This results in Alpha gaining less than Beta loses.

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