A System of Tradable Pollution Permits Is Cost- Effective Because

question 48

Multiple Choice

A system of tradable pollution permits is cost- effective because

• A) firms with a marginal cost of abatement lower than the permit price will buy permits and abate less.
• B) firms will choose their abatement so that their marginal cost of abatement equals the price of a permit, which is the same for all firms.
• C) firms facing a low marginal cost of abatement will not abate at all.
• D) firms facing a high marginal cost of abatement will not abate at all.
• E) firms facing a marginal cost of abatement lower than the permit price will not abate at all.

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Definitions:

Classical Economists

Economists from the late 18th and early 19th centuries who focused on the development of concepts like supply and demand, and the invisible hand theory.

Market Economy

A type of economic system where supply and demand determine the production of goods and services with minimal government intervention.

Prices

The amount of money required to purchase a good or service, determined by factors like supply and demand, production costs, and competition.

Aggregate Demand

The total demand for all goods and services within an economy at various price levels, in a given time period.