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A polluter will ________ its emissions and sell its excess permits on the market if the market price of permits is ________ its MAC at its chosen emission level
A polluter will ________ its emissions and sell its excess permits on the market if the market price of permits is ________ its MAC at its chosen emission level.
a.
reduce; less than
b.
reduce; greater than
c.
increase; less than
d.
increase; greater than
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Expert Solution
A polluter will reduce its emissions and sell its excess permits on the market if the market price of permits is greater than its MAC at its chosen emission level. If the firm has a lower MAC, then it can reduce its level of pollution more and sell the extra amount to the market from which it will gain money. So, the correct option is B "reduce; greater than".
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