When Comparing a System of Emission Taxes to a System

question 73

Multiple Choice

When comparing a system of emission taxes to a system of tradable pollution permits,the same amount of pollution could be abated in each as long as

• A)the marginal benefit of abatement curve was horizontal.
• B)the emission tax rate,t,was applied equally to all firms.
• C)the cap on emissions was chosen such that the equilibrium price of the permits,p×,was equal to the emissions tax rate,t.
• D)the marginal cost of abatement was equal across all firms.
• E)the cap on emissions was chosen such that the equilibrium price of the permits,p×,could rise over time.