How could transferable pollution rights lead to pollution being reduced at the lowest possible opportunity cost?
A policy allowing tradable pollution rights encourages polluters to find cheaper ways to reduce pollution. A firm that is able to reduce its pollution levels can sell its remaining pollution credits to others. The supervising government agency does not need to be informed about the cheapest methods by which a firm can reduce its pollution output. Firms most capable of reducing emissions will do so. Firms with the highest opportunity costs of pollution abatement are likely to purchase rights to pollute from others. This promotes economic efficiency in the attainment of targeted pollution levels.
You might also like to view...
In the view of the Classical economists, a increase in aggregate demand leads to
A) lower output levels. B) a higher price level. C) higher output levels. D) a lower price level.
The opportunity cost of a purchase is:
a. the selling price of the good or service. b. zero if the good or service satisfies a need. c. greater for persons who are rich. d. the good or service given up for the good or service purchased.