Which of the following firms is most likely to be the first to implement pollution control technologies if the government implements a system of transferable pollution rights?
A) the firm with the lowest marginal cost of production
B) the firm with the lowest marginal cost of implementation
C) the firm with the lowest level of pollution
D) the firm with the highest level of pollution

Question

Quizplus · Accepted Answer

The firm with the lowest marginal cost of implementation would be the most likely to implement pollution control technologies because they would be able to do so at the lowest cost. With transferable pollution rights, firms can trade their emissions credits, which allows the firm with the lowest cost of implementation to potentially earn a profit by selling their credits to other firms. Therefore, they have an incentive to implement pollution control technologies. The firm with the lowest marginal cost of production or the lowest level of pollution may not have as strong of an incentive to implement these technologies, and the firm with the highest level of pollution may face higher costs and may try to trade for credits instead of implementing expensive technologies.

Which of the Following Firms Is Most Likely to Be