To Reduce the Level of Pollution Emitted by Firms in an Industry,the

question 9

Multiple Choice

To reduce the level of pollution emitted by firms in an industry,the government could use a cap-and-trade policy or a carbon tax.Which of the following is true?

• A) The price of the good sold will rise with the carbon tax policy but not with the cap-and-trade policy.
• B) The quantity of the good sold will fall with the carbon tax policy but not with the cap-and-trade policy.
• C) The price of the good sold will rise under either policy, but there will be no change in the level of production.
• D) The quantity of the good sold will fall under either policy, but there will be no change in the price of the good.
• E) The price of the good sold will rise under either policy, and there will be a reduction in the level of production.

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Definitions:

Investment Portfolio

A collection of stocks, bonds, or other investment vehicles chosen by an individual or institution to achieve specific financial goals.

Objective Function

A mathematical function used in optimization to define the goal of the optimization problem, typically involving the maximization or minimization of some quantity.

Decision Variables

Variables that decision-makers control in optimization problems, representing choices available to achieve the desired outcome.

Shadow Prices

Theoretical prices of resources in constraint optimization problems, representing the marginal value of an additional unit of a scarce resource.