The government passes a new law allowing only 1,000 tons of pollutants per day to be discharged and simultaneously sells 1,000 transferable rights to emit one ton each of pollutants per day.Which of the following is true?
A)Pollution will be created by those least willing and able to pay the damages.
B)Pollution will be created by those most willing and able to pay for the right to pollute.
C)The funds collected by the government will be enough to compensate any individual harmed by the pollution.
D)Pollution will increase from zero to 1,000 units per day.
E)There will be no incentive for polluters to try to sneak emissions past government monitoring devices.

Question

Quizplus · Accepted Answer

The sale of transferable rights to emit pollutants will create a market for these rights, which will be bought by those industries or companies that are the most willing and able to pay for them. This means that those who can afford to pay for the right to pollute will be the ones discharging pollutants, rather than those who cannot afford to compete in the market. Therefore, pollution will be created by those most willing and able to pay for the right to pollute.

The Government Passes a New Law Allowing Only 1,000 Tons