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Consider a government agency that caps aggregate emissions of an air pollutant within its borders, establishing initial pollution allowances across all firms, and granting the
Consider a government agency that caps aggregate emissions of an air pollutant within its borders, establishing initial pollution allowances across all firms, and granting the firms the right to trade these allowances among themselves. The demand and supply curves for these pollution allowances have normal shapes and intersect at a positive price. The government's intent in establishing this private market for pollution allowances is to A. eliminate pollution. B. allow more pollution. C. control pollution by combining government control and a free market mechanism. D. increase revenue
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