If Two Firms Pollute, and the Increase in Costs to Firm

question 379

Multiple Choice

If two firms pollute, and the increase in costs to firm A from decreasing pollution is less than the decrease in costs to firm B from increasing pollution:

• A)the firms will not trade the right to pollute.
• B)the firms can benefit by trading the right to pollute.
• C)while both firms can benefit from trading, there is no way for them to determine an agreeable price.
• D)both firms will stop polluting.

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