Suppose a competitive market for tradable pollution permits is in equilibrium at p*,with the quantity of permits being set by government policy at Q*.If technological advances reduce the marginal cost of pollution abatement,then
A) the equilibrium price of permits will fall below p*.
B) the equilibrium price of permits will rise above p*.
C) the equilibrium quantity of permits will fall below Q*.
D) the equilibrium quantity of permits will fall above Q*.
E) there will be no change in p* or Q*.
Correct Answer:
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