Question

Problems and Applications Q8 Suppose that the government decides to issue tradable permits for a certain form of pollution. In terms of economic efficiency in the market for pollution, having the government auction the permits off is distributing them to firms. True or False: If the government chooses to distribute the permits, the allocation of permits among firms does not matter for efficiency, but it would affect the distribution of wealth. True False

Answer 1

1. False

2. True

Step-by-step explanation:

Tradable permits issued to firms, there will be no effect on economic efficiency for the market of pollution permit. The revenue of government will be increase by selling and auctioning those permits.