Factory a Can Reduce Emissions at a Cost of $400

question 216

Multiple Choice

Factory A can reduce emissions at a cost of $400 per ton. Factory B can reduce emissions at a cost of $100 per ton. In a system in which the government issues transferable pollution right at a price of $200 per ton:

• A)​Factory A can profit from selling its pollution rights to Factory B.
• B)​Neither firm can profit from selling its pollution rights to the other.
• C)​Factory B can profit from selling its pollution rights to Factory A.
• D)​Both firms have an incentive to sell pollution rights.

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