Because in any period of time and in any region the quantity of pollutants that can be absorbed by nature is fixed, the supply of "pollution rights" in a cap-and-trade system will be perfectly elastic (horizontal).

Question

Quizplus · Accepted Answer

The statement is false. While the supply of pollution rights may be predetermined, it is not necessarily perfectly elastic. The quantity of pollution rights available for trade could be restricted by regulations or other factors. Additionally, market demand for pollution rights will also affect the price and quantity traded, making the supply curve potentially upward sloping.

Because in Any Period of Time and in Any Region