The price of a pollution right is _______.
A)determined by the consumers consuming the products of the polluting firms
B)determined by the government
C)determined by the polluting firms
D)determined by the supply of and the demand for pollution rights
E)determined by the marginal social costs of the products of the polluting firms

Question

The price of a pollution right is _______.​
A)determined by the consumers consuming the products of the polluting firms
B)determined by the government​
C)determined by the polluting firms​
D)determined by the supply of and the demand for pollution rights​
E)determined by the marginal social costs of the products of the polluting firms​

Quizplus · Accepted Answer

The price of a pollution right is determined by the supply of and the demand for pollution rights. This is because pollution rights are tradable permits that allow the holder to emit a certain amount of pollution. The price is determined by the market forces of supply and demand, based on the total amount of pollution that is allowed and the quantity that is desired by the polluting firms. The government may set a cap on the total amount of pollution that is allowed, but the price of the pollution rights will ultimately be determined by the market. Consumers have no direct influence on the price, and the marginal social costs of the products of the polluting firms may be used to determine the level of pollution that is allowed, but not the price of the pollution rights.

The Price of a Pollution Right Is _______.​

The Price of a Pollution Right Is _______.