This is another incentive diagram question. Probably my favorite of the diagrams is the fixed abatement subsidy.  It’s just my personal preference, so don’t judge me about it.  Anyway, this diagram has several important areas.  One is the cost savings on the abatement that was being done initially.  Another area is the net gain from the additional abatement that is done when the new technology is adopted.  Draw the diagram and clearly indicate these two areas and which is which and all that.

Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter2: Some Tools Of The Economist
Section: Chapter Questions
Problem 14CQ
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  1. This is another incentive diagram question.

Probably my favorite of the diagrams is the fixed abatement subsidy.  It’s just my personal preference, so don’t judge me about it.  Anyway, this diagram has several important areas.  One is the cost savings on the abatement that was being done initially.  Another area is the net gain from the additional abatement that is done when the new technology is adopted.  Draw the diagram and clearly indicate these two areas and which is which and all that. 

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