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Suppose that a new chief of the government agency that caps aggregate emissions of an air pollutant within its borders, establishes initial pollution allowances across
Suppose that a new chief of the government agency that caps aggregate emissions of an air pollutant within its borders, establishes initial pollution allowances across all firms, and grants the firms the right to trade these allowances among themselves, decides to restrict considerably the extent to which firms in this nation can legally utilize pollution allowances. What effects will this policy change have on the market price of pollution allowances? A. The market price of pollution allowances will decrease. B. The market price of pollution allowances will increase only if the amount of pollution decreases, otherwise there will be no effect. C. The market price of pollution allowances will remain unchanged. D. The market price of pollution allowances will increase
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