Figure 10-8

-Refer to Figure 10-8.This graph shows the market for pollution when permits are issued to firms and traded in the marketplace.The equilibrium price of pollution is
A)$50
B)$500
C)$1,000
D)$2,000

Question

Figure 10-8
 
-Refer to Figure 10-8.This graph shows the market for pollution when permits are issued to firms and traded in the marketplace.The equilibrium price of pollution is
A)$50 
B)$500 
C)$1,000 
D)$2,000

Quizplus · Accepted Answer

The equilibrium price of pollution is where the supply and demand curves intersect, which is at a permit price of $1,000. At this price, the quantity of pollution traded is 50 permits. Both the buyers and sellers are better off at this equilibrium price, as the buyers are able to purchase the permits at a lower price than their maximum willingness to pay, and the sellers are able to sell the permits at a higher price than their minimum willingness to accept.

Figure 10-8 -Refer to Figure 10-8.This Graph Shows the Market for Pollution