Exhibit 17.7 -Refer to Exhibit 17.7,which shows the optimal allocation of pollution rights to firms polluting a river.If the government does not charge firms for polluting the river,the ______ A)firms will emit Q₁ units of the pollutant at a price of P₀ each. B)firms will emit Q₂ units of the pollutant at a price of P₀ each. C)firms will emit Q₀ units of the pollutant at a price of P₃ each. D)firms will emit Q₁ units of the pollutant at a price of P₁ each. E)firms will emit Q₂ units of the pollutant at a price of P₂ each.

Question

Quizplus · Accepted Answer

If the government does not charge firms for polluting, they will emit the quantity where the marginal cost of pollution is zero, which is typically the maximum quantity, Q₂, at a price of P₀ each.

Exhibit 17.7 -Refer to Exhibit 17.7,which Shows the Optimal Allocation of Pollution