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    efficient level of abatement

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    Using a graph of the pollution abatement market, model a situation in which the allocatively efficient level of abatement occurs at 100 percent, or equivalently where pollution is zero. Referring to the relative position of the MSC and MSB curves, explain this outcome intuitively.

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    MSB and MSC of abatement must intersect where abatement equals 100%, (or alternatively where MSB > MSC at the 100% level). ...

    Solution Summary

    MSB and MSC of abatement are emphasized.