A market for pollution permits can efficiently allocate the right to pollute through the forces of supply and demand.

Question

Quizplus · Accepted Answer

A market for pollution permits functions like a market for any other commodity, where the price is determined by the forces of supply and demand. By creating a market for pollution permits, the right to pollute is allocated to firms that value it the most and are willing to pay for it. This allows for efficient allocation of pollution as firms that can reduce their pollution easily will do so, while those who find it difficult will opt to purchase permits. This incentivizes firms to reduce pollution at a lower cost, resulting in a more cost-effective and efficient solution to environmental problems.

A Market for Pollution Permits Can Efficiently Allocate the Right