Which of the following would happen if the government increased the quantity of pollution rights to be sold,other things equal?
A)Pollution would not be affected.
B)The price of pollution rights would rise, and the amount of pollution would decrease.
C)The price of pollution rights would fall, and the amount of pollution would decrease.
D)The price of pollution rights would fall, and the amount of pollution would increase.
E)The price of pollution rights would rise, and the amount of pollution would increase.

Question

Quizplus · Accepted Answer

If the government increased the quantity of pollution rights to be sold, there would be an increase in supply of pollution rights. This increase in supply would lead to a decrease in the price of pollution rights (since there are more available). As the price falls, firms would be able to buy the rights at a lower cost and would be inclined to pollute more, increasing the amount of pollution. Therefore, the answer is D.

Which of the Following Would Happen If the Government Increased