Refer to the above diagram illustrating a market for pollution rights in which government has fixed the supply of rights at 1,000 tons.If the demand for pollution rights were to increase as a result of economic growth,the:

Question

Quizplus · Accepted Answer

If the demand for pollution rights were to increase, it would mean that there is increased demand for the right to pollute. As the supply of rights is fixed, this would lead to a shortage of rights, causing the price of pollution rights to increase. This would incentivize firms to reduce their pollution levels and also raise revenue for the government, which could then use the funds for environmental conservation efforts. Therefore, choice B is the correct answer.

Refer to the Above Diagram Illustrating a Market for Pollution