Assume the price of a tradable emissions permit for a ton of sulfur dioxide is $

Question

Assume the price of a tradable emissions permit for a ton of sulfur dioxide is $150. Which statement is FALSE? A firm that buys permits has an incentive to limit pollution up to the point at which the marginal benefit of emissions is equal to $150. A firm that has more permits than it plans to use has an incentive to limit pollution up to the point at which the marginal benefit of emissions is equal to $150. The opportunity cost of emitting a ton of sulfur dioxide is $75 for all films. The opportunity cost of emitting a ton of sulfur dioxide is $150 for all firms.

Explanation / Answer

C. The opportunity cost of emitting a ton of sulfur dioxide is $ 75 for all firms.

To reduce pollution in the economy, government issued tradable permits which limits the quantity of pollution emmission. The price of permit is equal to the opportunity cost of emitting pollution.

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