The equilibrium permit price of a pollution right is _____ A

Marketing Dec 26, 2020

The equilibrium permit price of a pollution right is _____

A. determined by the consumers consuming the products of the polluting firms.

B. determined by the supply of and the demand for pollution rights.

C. determined by the municipal corporation of the area.

D. determined by the marginal social costs of the products of the polluting firms.

E. determined by the government.

Expert Solution

The correct option is:

D. determined by the marginal social costs of the products of the polluting firms.

Marginal social cost includes both the private cost as well as the external cost. It is used to determine the equilibrium price for the pollution permits.

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