In the Market for Pollution Permits, the Demand for Permits

question 355

Multiple Choice

In the market for pollution permits, the demand for permits comes from

• A) firms that would prefer to use permits rather than incur abatement costs.
• B) the Chicago Board of Trade.
• C) firms with low abatement costs.
• D) the Environmental Protection Agency.

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Definitions:

Consumer Price Index

Measure of the aggregate price level.

Laspeyres Index

A price index used to measure the price change between a base period and the current period, using the base period quantities as weights.

Paasche Index

An economic measure that calculates the change in the price level of goods and services purchased by the consumer in the current period compared to a selected base period, weighting the current period prices.

Laspeyres Price Index

Amount of money at current year prices that an individual requires to purchase a bundle of goods and services chosen in a base year divided by the cost of purchasing the same bundle at base-year prices.