As the price per unit of emissions falls, the quantity of emissions demanded:
A) remains constant.
B) falls.
C) rises.
D) rises, but eventually falls.

Question

Quizplus · Accepted Answer

When the price per unit of emissions falls, it becomes relatively cheaper for firms to emit pollutants. As a result, the quantity of emissions demanded by these firms will rise, all other things being equal. This is because as the cost of emissions decreases, firms will increase their use of polluting inputs, and/or use less expensive but more polluting inputs, resulting in a higher quantity of emissions.

As the Price Per Unit of Emissions Falls, the Quantity