If Emissions Permits Are Traded Freely Between Profit- Maximizing Firms

question 44

Multiple Choice

If emissions permits are traded freely between profit- maximizing firms in the private market,

• A) the amount of pollution abatement will be identical to that which the firms would have willingly undertaken on their own.
• B) each firm will face identical costs of pollution abatement.
• C) there will be more than the optimal amount of pollution.
• D) all firms will use identical pollution abatement technologies.
• E) marginal abatement costs will be equalized across firms.

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Definitions:

Factory Overhead

Factory overhead, also known as manufacturing overhead, includes all the indirect costs related to manufacturing that cannot be directly attributed to a specific product unit.

Direct Materials

Raw materials that are directly traceable and integral to the finished product in the manufacturing process.

Work In Process

This refers to the goods that are in the middle of the manufacturing process but are not yet complete.

Process Cost System

An accounting method used to track production costs for continuous production processes, allocating costs to units of product.