Tradable Permits That Establish a Maximum Amount of Pollution and Then

Multiple Choice

Tradable permits that establish a maximum amount of pollution and then allow firms to trade pollution quota permits among them:

A) works most efficiently if the polluting industries are dominated by a large firm.
B) tend to work better than taxes but only when the government originally allocates the permits to the biggest polluters.
C) tend to not work because firms don't have an incentive to minimize their pollution.
D) tend to work better than taxes because firms with higher costs of eliminating pollution buy permits from firms with lower costs of eliminating pollution.