There are two industries that emit sulfur dioxide. The government decides to use a policy of marketable permits for pollution. If Harry's industry has a higher marginal cost of reducing sulfur dioxide than does Joe's industry,

Question

Quizplus · Accepted Answer

Since Harry's industry has a higher marginal cost of reducing sulfur dioxide, it is more cost-effective for Harry's industry to buy permits rather than reduce emissions. Joe's industry, with a lower marginal cost of reducing emissions, will find it cheaper to reduce sulfur dioxide and sell the excess permits to Harry's industry. This makes B the correct choice.

There Are Two Industries That Emit Sulfur Dioxide