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Regulations impose uniform requirements on a popu- lation of agents (in a sector or in a particular place) since civil servants do not possess the appropriate information about the particular features of the agents' respective situ- ations nor, most importantly, about the true marginal abatement cost curves of firms (see Figure 3.1).
percent), but also unequal marginal abatement costs (ci on the Cmi curve).
Figure 3.2 Matching marginal abatement cost and marginal external damages cost
On Figure 3.2 the marginal abatement cost (MAC) curve increases from right to left because the more a pollutant is abated, the higher the unit (marginal) costs for additional abate- ment.
If a tax with a rate t* is imposed, the polluter will abate pollution from B to P* because beyond this level (A on MAC) it is cheaper to pay the tax than to abate emissions further.
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