There are two industries that emit sulfur dioxide. The government decides to use a cap-and-trade policy by issuing permits for pollution. If Harry's industry has a higher marginal cost of reducing sulfur dioxide than does Joe's industry
A) the cap-and-trade policy will not make the amount of pollution efficient.
B) Joe's industry will sell permits to Harry's industry.
C) Harry's industry will sell permits to Joe's industry.
D) Harry's industry and Joe's industry will emit the same quantity of sulfur dioxide.

Question

Quizplus · Accepted Answer

Joe's industry, having a lower marginal cost of reducing sulfur dioxide, will find it cheaper to reduce emissions and can sell permits to Harry's industry, which has a higher marginal cost.

There Are Two Industries That Emit Sulfur Dioxide