Suppose Two Firms Operate Under a System of Marketable Pollution

question 255

Multiple Choice

Suppose two firms operate under a system of marketable pollution permits. If it costs Firm A $25 to reduce pollution by 1,000 units per day, and Firm B can reduce costs by $35 by increasing pollution by 1,000 units per day

• A) the firms cannot gain by trading the right to pollute.
• B) both firms can benefit if Firm A trades the right to pollute 1,000 units to Firm B for $30.
• C) both firms can benefit if Firm A trades the right to pollute 1,000 units to Firm B for $40.
• D) both firms can benefit if Firm B trades the right to pollute 1,000 units to Firm A for $30.

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Definitions:

Respondent Behavior

A behavioral process (also known as the conditioned response) that occurs in reaction to a specific stimulus without conscious intention.

Physiological Processes

The natural biological activities and functions occurring within the body's systems and organs.

Skinner

B.F. Skinner, an influential psychologist known for his work on behaviorism and the development of the operant conditioning theory.

Social Interaction

involves the process by which individuals act and react in relation to others, impacting and shaping their behaviors, roles, and expectations.