With Marketable Pollution Permits, If the Number of Pollution Rights

question 54

Multiple Choice

With marketable pollution permits, if the number of pollution rights available increases, the equilibrium price _______ and the equilibrium quantity _______ .

• A) increases; does not change
• B) increases; increases
• C) decreases; does not change
• D) decreases; increases

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Definitions:

Comparative Advantage

The ability to produce a good at a lower opportunity cost than others can produce it. Relative costs determine comparative advantage.

Marginal Utility

The additional satisfaction or benefit a consumer receives from consuming one more unit of a good or service.

Consumed

The act of using up a good or service, thus removing it from the market and contributing to economic activity.

Marginal Utility

The variation in pleasure or usefulness a consumer feels from using one more unit of a product or service.