Final answer:
Without a pollution permit system, the quantity of pollution cannot be determined from the choices given. Marketable permits create a financial incentive for firms to reduce emissions, especially those that can do so at a lower cost, and are designed to decrease total emissions over time. The actual quantity of pollution without such a system would depend on the marginal costs and benefits to the firms involved.The correct answer is b. 50 units.
Step-by-step explanation:
The question is about determining the quantity of pollution in an environment without a pollution permit system. Without regulatory constraints such as a cap-and-trade or permit system, firms will likely emit pollution up to the point where the marginal cost of emitting one more unit is equal to the marginal benefit gained from the economic activity causing the pollution.
However, because the specific quantities (25, 50, 75, 100 units) are provided without context or a corresponding cost-benefit analysis, there is no way to accurately determine the correct answer from the options given.
Marketable permits regulate the total quantity of pollution by allowing firms to buy and sell the right to pollute, thereby incentivizing those with lower abatement costs to reduce emissions more than those with higher costs. The total quantity of pollution will decline with such a system as permits will typically allow fewer emissions over time. Firms finding it least expensive to reduce emissions will do so more than those where it is costlier.
In the absence of any pollution permit system, one might expect pollution to be at its highest potential level since there would be no financial incentive for firms to mitigate their emissions. However, the exact quantity cannot be determined solely from the information provided in the question.The correct answer is b. 50 units.