Firm X pays firm Y $345 for a pollution permit. This expenditure on the part of firm X is considered a __________. Firm Y ends up spending $200 to eliminate some pollution. This expenditure on the part of firm Y is considered a __________.

Question

Quizplus · Accepted Answer

Firm X's payment to Firm Y for the pollution permit is considered a transfer, as it involves a payment from one party to another without the production of goods or services. Firm Y's expenditure to eliminate pollution is considered a resource cost, as it involves the use of resources (in this case, money) in order to achieve a specific goal (reducing pollution).

Firm X Pays Firm Y $345 for a Pollution Permit