A tradable permit system:
A) requires that each firm reduce its pollution by the same amount.
B) is difficult to implement because regulators do not know the marginal abatement costs of every company.
C) achieves a given amount of pollution reduction at the least cost because firms with lowest marginal abatement costs do most of the reduction.
D) increases pollution because the government gives firms permits that grant them the right to pollute.

Question

Quizplus · Accepted Answer

A tradable permit system is designed to minimize the cost of achieving a pollution reduction goal by allowing firms with lower marginal abatement costs to reduce more pollution, thereby ensuring that the overall reduction is achieved in the most cost-effective manner. Firms with higher abatement costs can buy permits from those with lower costs, leading to an efficient allocation of pollution reduction efforts across the economy.

A Tradable Permit System