If two firms pollute, and the increase in costs to firm A from decreasing pollution is less than the decrease in costs to firm B from increasing pollution:

Question

Quizplus · Accepted Answer

The firms can benefit by trading the right to pollute because firm A can reduce pollution at a lower cost, and firm B can increase pollution at a higher cost, leading to a mutually beneficial trade.

If Two Firms Pollute, and the Increase in Costs to Firm