Question

Tradable pollution permits a. have prices that are set by the government. b. will be more valuable to firms that can reduce pollution only at high costs. c. are likely to create a higher level of total pollution. d. are less desirable than corrective taxes in reducing pollution.

Answer 1

Answer:

Option (b) is correct.

Explanation:

Pollution permits refers to the permits that are allocated by the government to the firms creating pollution. The only motive of these permits is to reduce the pollution in an economy. The firms with the higher cost of reducing pollution are generally benefited from the trad-able pollution permits because they would obtain the pollution permits from the firms other at a price lower than the cost of reducing pollution. So, the trad-able pollution permits are more valuable to the firms with higher cost of reducing pollution.