Question

Tradable pollution permits A. are less desirable than corrective taxes in reducing pollution. B. are likely to create a higher level of total pollution. C. will be more valuable to firms that can reduce pollution only at high costs. D. have prices that are set by the government.

Answer 1

The correct answer is letter "C": will be more valuable to firms that can reduce pollution only at high costs.

Step-by-step explanation:

Tradable pollution permits are instruments issued by the government that allows companies to pollute up to a certain level according to their businesses. In case the companies exceed the pollution permit provided, penalties will apply over the excess of pollution. A company can sell those instruments in case they were not used during a given period.

Thus, firms that unfortunately have to pollute environments to conduct their operations with a wide range of operations will value more the tradable pollution permits since reducing pollution costs tend to be expensive.

Answer 2

C. will be more valuable to firms that can reduce pollution at high costs.

Step-by-step explanation:

Tradable pollution permits is a scheme that gives companies a right to produce pollution at a certain level during a certain period. If the pollution of a company is low b but it has high pollution permit than it can sell the leftover permit to those firms who produce more pollution. Tradable pollution permit enables the firm to exchange pollution permit in return for efficient opportunity. This is valuable for those firms who create more pollution and reducing pollution costs them more than trading a pollution permit with other firms.