Final answer:
Pollution Busters Inc. will abate the first 30 pounds of particulates since the abatement cost for each 10-pound increment is less than the $1,000 tax. Beyond that, they will pay the pollution tax because the abatement cost exceeds the tax.
Step-by-step explanation:
To determine how much Pollution Busters Inc. will pollute and how much it will abate, we analyze the costs associated with each incremental reduction of pollutants against the pollution tax they would have to pay if they chose not to abate. Initially, the firm will abate the first 10 pounds of particulates for a cost of $300, which is cheaper than the $1,000 tax. Continuing this analysis for subsequent increments, the firm will also abate the second and third sets of 10 pounds, facing costs of $500 and $900, respectively, both of which are still less than the tax. However, the fourth set of 10 pounds would cost $1,500 to abate, which is greater than the tax, hence the firm decides that it is more economical to pay the tax on this increment of pollution.
Therefore, Pollution Busters Inc. will reduce pollutants by 30 pounds and pay the tax on any pollution above this level. This decision minimizes the company's costs given the current pollution tax rate. With a tax of $1,000 per 10 pounds of particulates emitted, there is no incentive for the firm to reduce pollution by more than 30 pounds as the marginal cost of abatement exceeds the tax beyond this point.