Question

Please answer all three.

7. The EPA's CAP program for SO2 gave producers an incentive to look for cheaper ways of lowering emissions becausc A. an emissions rate was mandated for firms and the penalties were high B. increasing scarcity of permits drove their price up C. offset trading offered large trade gains D. emissions taxes were enforced with vigor 8. In a cap-and-trade program, as polluters buy and sell permits, they move to a situation wherc A. all firms' marginal abatement costs are equal to the price of the permits B. the demand for permits will exceed the supply C. total abatement costs are cqual to the total amount spent on permits D. the total amount spent on permits is less than the total amount spent on abatement 9. In a competitive market for transferable discharge permits, the demand curve is equal to A. the aggregate supply curve for all firms supplying pcrmis B. the aggregate marginal abatement cost functions of all the firms participating in the market C. the aggregate production curve for all firms participating in the market D. the aggregate cmissions curve for all firms participating in the markct

Answer 1

7. The correct answer is C i.e Offset Trading offered large trade gains. The companies look cheaper ways to reduce their emissions below the cap set by EPA and then used the left emission credit to sell through auction to firm where emission are above cap which result in large trade gains.