Firm a and Firm B Emit 300 Tons of Pollution

question 222

Multiple Choice

Firm A and Firm B emit 300 tons of pollution each and each have marketable permits that allow each to emit 100 tons of pollution.If it costs $5,000 for Firm A to eliminate 100 tons of pollution and it costs Firm B $6,000 to eliminate 100 tons of pollution,then

• A) Firm B sells its permits to Firm A for a price above $6,000.
• B) Firm A sells its permits to Firm B for a price below $6,000.
• C) Firm A sells its permits to Firm B for a price above $6,000.
• D) Firm B sells its permits to Firm A for a price below $6,000.
• E) neither Firm A nor Firm B sells permits because neither has extra permits.

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