Several years ago, in an effort to reduce acid rain, the EPA allocated “pollution allowances” to manufacturers emitting sulfur dioxide and nitrogen oxide. These pollution permits capped each company’s maximum annual level of emissions.

The EPA allowed those companies that did not meet their maximum level of emissions to sell the balance of their allowance to other producers in the form of “pollution credits.” Do you think that the pollution-credit market improved or reduced the effectiveness of the pollution-permit program in achieving an optimal level of acid rain? Explain your answer.