If two firms pollute, and the increase in costs to firm A from decreasing pollution is equal to the decrease in costs to firm B from increasing pollution:
A)the firms cannot benefit from trading the right to pollute.
B)the firms can benefit by trading the right to pollute.
C)while both firms can benefit from trading, there is no way for them to determine an agreeable price.
D)both firms will stop polluting.

Question

Quizplus · Accepted Answer

If the increase in costs to firm A from decreasing pollution is equal to the decrease in costs to firm B from increasing pollution, there is no net gain from trading pollution rights, so they cannot benefit from trading.

If Two Firms Pollute, and the Increase in Costs to Firm