A Government Passes a New Law Allowing Only 1,000 Tons

question 168

Multiple Choice

A government passes a new law allowing only 1,000 tons of pollution per day to be generated and simultaneously sells 1,000 transferable rights to emit one ton each of pollution per day. Which of the following is true?

• A) The pollution will be created by those least willing and able to pay the damages.
• B) The pollution will be created by those most willing and able to pay for the right to pollute.
• C) The funds collected by the government will be enough to compensate any individuals harmed by the pollution.
• D) Pollution will increase from zero to 1,000 units per day.
• E) There will be no incentive for polluters to try to sneak emissions past government monitoring devices.

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Definitions:

Required Rate Of Return

The lowest annual return percentage that persuades individuals or companies to commit capital to a particular project or security.

Net Working Capital

The difference between a company's current assets and current liabilities, indicating its short-term liquidity.

Tax Rate

The share of profits or income that is levied as tax on a person or a corporation.

Minimum Bid

The lowest price that a seller is willing to accept for an item being sold at auction.