Suppose two firms operate under a system of marketable pollution permits. If it costs Firm A $25 to reduce pollution by 1,000 units per day, and Firm B can reduce costs by $35 by increasing pollution by 1,000 units per day:
A. the firms cannot gain by trading the right to pollute.
B. both firms can benefit if Firm A trades the right to pollute 1,000 units to Firm B for $30.
C. both firms can benefit if Firm A trades the right to pollute 1,000 units to Firm B for $40.
D. both firms can benefit if Firm B trades the right to pollute 1,000 units to Firm A for $30.
Answer: B
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The kinked demand curve model explains pricing in monopoly markets.
Answer the following statement true (T) or false (F)
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Converting corn into ethanol is most profitable when there is/are:
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