Firm a and Firm B Emit 300 Tonnes of Pollution

question 95

Multiple Choice

Firm A and Firm B emit 300 tonnes of pollution each and each have marketable permits that allow each to emit 100 tonnes of pollution. If it costs $5,000 for Firm A to eliminate 100 tonnes of pollution and it costs Firm B $6,000 to eliminate 100 tonnes of pollution, then

• A) Firm A sells its permits to Firm B for a price above $6,000.
• B) Firm A sells its permits to Firm B for a price below $6,000.
• C) Firm B sells its permits to Firm A for a price below $6,000.
• D) Firm B sells its permits to Firm A for a price above $6,000.
• E) neither Firm A nor Firm B sells permits because neither has extra permits.

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Definitions:

Smart People

Individuals who display high levels of intelligence, problem-solving skills, and the ability to understand and handle complex ideas.

Adequate Level

A standard or measure that is deemed sufficient or satisfactory for its intended purpose.

Acceptability

The extent to which an idea, product, or behavior is perceived as agreeable, suitable, or satisfactory by a group or individual.

Satisficers

Individuals who make decisions that suffice to meet their needs rather than optimizing the best possible outcome.