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

question 111

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.
In Figure 13.4, if the government sells Q_b permits to pollute at a price of P_b each, then:

• A)the allocation of pollution reduction is inefficient.
• B)firms in the market will be forced to shut down due to excessive government regulation.
• C)the allocation of pollution reduction is efficient, because only those firms with a marginal cost of pollution reduction greater than P_b will buy the permits.
• D)the allocation of pollution reduction is efficient, because only those firms with a marginal cost of pollution reduction less than P_b will buy the permits.
• E)the allocation of pollution reduction is inefficient, because only those firms with the lowest costs of pollution reduction will purchase the permits.

---

Definitions:

Practical Reasoning

The process of figuring out what to do in a given situation, or determining the best course of action based on rational thinking.

Reflectivity

The ability to think about one's own thoughts, feelings, and behaviors critically and analytically.

Wisdom

The ability to think and act using knowledge, experience, understanding, common sense, and insight.

Competence Stage

A phase in the learning process or skill development where an individual gains the ability to perform tasks effectively, yet requires conscious effort to execute.