If the number of available tradable emissions permits is decreased,the equilibrium price of the permits _____ and the equilibrium quantity of emissions _____.
A)decreases;decreases
B)increases;increases
C)increases;decreases
D)decreases;increases

Question

Quizplus · Accepted Answer

If the number of available emissions permits is decreased, this means there are fewer permits available for firms to purchase. With a decrease in supply, the equilibrium price of the permits will increase. Additionally, because there are fewer permits available, firms will have to either reduce their emissions or pay a higher price for the permits they need. This will result in a decrease in the equilibrium quantity of emissions. Therefore, the correct answer is C.

If the Number of Available Tradable Emissions Permits Is Decreased,the