If the government creates a system of pollution permits, firms with low marginal costs of reducing pollution will
A) hold on to the permits they have been issued and not attempt to buy more.
B) not be issued permits.
C) buy permits from other firms.
D) sell permits to other firms.

Question

Quizplus · Accepted Answer

Firms with low marginal costs of reducing pollution will find it cheaper to reduce their pollution levels rather than buying permits. As a result, they can sell their excess permits to other firms that find it more expensive to reduce pollution.

If the Government Creates a System of Pollution Permits, Firms