Do these firms have an incentive to reduce their pollution

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Reference no: EM131006137

Consider a competitive market that all the firms in this market vent an ozone reducing chemical into the atmosphere as a consequence of their production activities.

A. Is tis outcome efficient? Explain with the help of a diagram.

B. Do these firms have an incentive to reduce their pollution? Explain with the help of a diagram.

C. Modern economists suggest 2 solutions for the pollution problem above. Explain how pollution tax (use a diagram) and an emission permit trading scheme can both "solve" the problem of pollution.

Reference no: EM131006137

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