In the Multiple-Polluter Case for a Pollution Permit System, Suppose

question 22

Multiple Choice

In the multiple-polluter case for a pollution permit system, suppose Firm 1 and Firm 2 face marginal abatement cost functions of MAC₁ = 4.5A₁ and MAC₂ = 2.25A₂, respectively. If the government issues each firm tradeable pollution permits such that each has to abate 10 units of pollution, then, based on this allocation,

• A) the two firms have no incentive to trade
• B) firm 1 has an incentive to buy a permit if the price is greater than $45
• C) firm 2 has an incentive to buy a permit if the price is above $22.50
• D) firm 2 will be willing to sell a permit if the price is above $22.50

---

Definitions:

Seizes

To take hold of suddenly and forcibly; in a legal context, it can mean to take legal possession of something.

Rental Agreement

A contract between a landlord and tenant that outlines the terms and conditions of the property rental.

Duty

A moral or legal obligation to ensure the well-being or safety of others, or to adhere to a standard of conduct.

Careful

Careful describes the act of being cautious, meticulous, or taking pains to avoid mistakes or accidents in one's actions or decisions.