If Two Firms Have Different Abatement Costs, in a System

question 402

Multiple Choice

If two firms have different abatement costs, in a system of marketable pollution permits

• A) the firm with lower abatement costs will sell permits to the firm with higher abatement costs.
• B) the firm with lower abatement costs will purchase permits from the firm with higher abatement costs.
• C) no voluntary exchange that makes both firms better off is possible.
• D) voluntary exchange will occur, but it is impossible to determine which firm will be the seller and which will be the purchaser.

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