The Figure Given Below Shows the Demand for Permits and the Maximum

question 68

Multiple Choice

The figure given below shows the demand for permits and the maximum permissible level of pollution. Figure 13.4 In the figure,
The downward sloping line is the demand curve of permits;
The vertical line denotes the maximum permissible limit of pollution.
Refer to Figure 13.4.Suppose the government wishes to reduce pollution to a quantity of Q_b.If it sells marketable pollution permits at a quantity of Q_b then:

• A)firms will bid the price of the permits up to a price of P_a, and Q_a pollution will result.
• B)firms will bid the price of the permits up to a price of P_b, and Q_b pollution will result.
• C)firms will bid the price of the permits up to a price of P_c, and Q_c pollution will result.
• D)firms will bid the price of the permits up to a price of P_c, and Q_b pollution will result.
• E)firms will not be willing to pay a price for the permits, so no pollution will be reduced.

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