Social welfare can be enhanced by allowing firms to trade their rights to pollute.

Question

Quizplus · Accepted Answer

By allowing firms to trade pollution rights, it can lead to a more efficient allocation of resources where firms that can reduce pollution at lower costs will do so, while those for whom it is more expensive can buy rights. This can lead to an overall reduction in pollution at a lower cost to society, potentially enhancing social welfare.

Social Welfare Can Be Enhanced by Allowing Firms to Trade