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 of the following is incorrect?
Choose one answer.

a. 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.

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

c. 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.

d. The opportunity cost of emitting a ton of sulfur dioxide is $150 for all firms.

Explanation / Answer

c. 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.

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