As long as two firms have different abatement costs, they
A) can benefit under a system of marketable pollution permits by trading the right to pollute.
B) will prefer a pollution tax to a system of marketable pollution permits.
C) will decrease the price of their product if taxed on the amount of pollution they emit.
D) will not be able to benefit from trading the right to pollute under a system of marketable pollution permits.

Question

Quizplus · Accepted Answer

If two firms have different abatement costs, they can benefit under a system of marketable pollution permits by trading the right to pollute. The firm with low abatement costs can reduce its pollution levels more efficiently and sell its unused pollution permits to the firm with higher abatement costs. This creates a market-based incentive to reduce pollution at the lowest cost to society.

As Long as Two Firms Have Different Abatement Costs, They