A system of cap-and-trade is used to reduce acid rain caused by emissions from electric power utilities.Which of the following statements is true?
A)Market forces determine both the demand for pollution permits and their supply.
B)Public choice determines both the demand for pollution permits and their supply.
C)Market forces determine the demand for pollution permits,and property rights determine their supply.
D)Property rights determine the demand for pollution permits,and the government determines their supply.
E)Market forces determine the demand for marketable permits,and the government determines their supply.

Question

Quizplus · Accepted Answer

In a cap-and-trade system, the government sets a limit (cap) on the total amount of emissions allowed and issues permits up to that limit. Companies that need to emit pollutants must obtain these permits, creating a demand for them. The supply of permits is determined by the government based on the cap, while the demand is driven by market forces as companies trade permits among themselves to meet their individual needs.

A System of Cap-And-Trade Is Used to Reduce Acid Rain