A polluter in a CAP program will purchase a permit rather than decrease emissions when A) the permit price is zero B) MAC permit price D) none of above

Question

A polluter in a CAP program will purchase a permit rather than decrease emissions when
A) the permit price is zero
B) MAC < permit price
C) MAC > permit price
D) none of above

Quizplus · Accepted Answer

When MAC (marginal abatement cost) is greater than the permit price, it is economically more feasible for a polluter to purchase a permit rather than reducing emissions. This is because the cost of reducing emissions (MAC) is greater than the cost of purchasing a permit. Option A is incorrect because when the permit price is zero, it is not profitable for the polluter to purchase a permit, they might as well keep emitting. Option B is incorrect because when MAC is less than the permit price, it is more efficient for the polluter to decrease emissions rather than purchasing a permit.

A Polluter in a CAP Program Will Purchase a Permit