Factory a Can Reduce Emissions at a Cost of $250

question 178

Multiple Choice

Factory A can reduce emissions at a cost of $250 per ton. Factory B can reduce emissions at a cost of $400 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)​Both firms have an incentive to buy pollution rights.
• 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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Definitions:

Owner Control

The extent to which the owners of a business have the power to make decisions and influence the company's operations and strategic direction.

Bonds

Fixed income investments representing loans made by an investor to a borrower, typically corporate or governmental, which pay interest at predetermined intervals.

Notes Payable

A written agreement where the borrower promises to pay back a certain amount of money, under specific terms, to the lender at a future date.

Unamortized Discount

The portion of a bond's issue price that is below its face value and has not yet been amortized over the life of the bond.