Microeconomics: Principles, Applications, and Tools (8th Edition)

Published by Prentice Hall
ISBN 10: 0-13294-886-9
ISBN 13: 978-0-13294-886-9

Chapter 16 - External Costs and Environmental Policy - Exercises - 16.4 Marketable Pollution Permits - Page 374: 4.4

Answer

decreases decreases

Work Step by Step

Technology that decreases abatement costs will be used by firms rather than buying permits that allow pollution. This will shift the demand curve for permits downward and to the left, further decreasing the equilibrium price of permits.
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