Suppose Two Power Plants Pollute a River and Both Firms

Multiple Choice

Suppose two power plants pollute a river and both firms operate under a system of marketable pollution permits. If it costs Firm A $90 to reduce pollution by 800 units per day, and Firm B can reduce costs by $115 by increasing pollution by 800 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 increase pollution by 800 units to Firm B for $70.
C) both firms can benefit if Firm B trades the right to increase pollution by 800 units to Firm A for $120.
D) both firms can benefit if Firm A trades the right to increase pollution by 800 units to Firm B for $100.