Suppose that the "Clean and Clear" environmental group buys 20% of the pollution permits and never uses them.The effect on pollution market is:
A) The price of pollution rights would fall,and the amount of pollution would decrease
B) The price of pollution rights would fall,and the amount of pollution would increase
C) The price of pollution rights would rise,and the amount of pollution would increase
D) The price of pollution rights would rise,and the amount of pollution would decrease
E) Pollution would not be affected

Question

Quizplus · Accepted Answer

When Clean and Clear buys 20% of the pollution permits and does not use them, it decreases the supply of pollution permits in the market. As a result, the price of pollution rights would rise because of the scarcity of permits. Therefore, polluters must pay more to purchase the remaining permits. This higher cost of pollution permits would force some polluters to decrease their pollution emissions or to invest in cleaner technology. Thus, the amount of pollution would decrease as a result of the decrease in demand for polluting goods and services. Therefore, choice D is the correct answer.

Suppose That the "Clean and Clear" Environmental Group Buys 20