Under a system of marketable pollution permits,the ________ amount of permits supplied,the ________ the equilibrium price charged for each permit:
A) higher; higher
B) higher; lower
C) lower; lower
D) It cannot be determined.

Question

Quizplus · Accepted Answer

In a system of marketable pollution permits, the supply of permits is determined by the government or a regulatory agency. If the government limits the number of permits that are issued, the supply of permits will be low. If there are fewer permits available, the equilibrium price for each permit will be higher because the demand for permits will be greater than the supply. Therefore, a higher amount of permits supplied will result in a lower equilibrium price, and a lower amount of permits supplied will result in a higher equilibrium price. Thus, the correct answer is B.

Under a System of Marketable Pollution Permits,the ________ Amount of Permits