Suppose Jones' company and Smith's company both pollute. Under a system of marketable pollution permits, which of the following must be true in order for Smith and Jones to benefit from trading the right to pollute?
◦ Smith and Jones must have different abatement costs.
◦ The government must direct Smith and Jones toward beneficial trades.
◦ Smith and Jones must have a social conscience and must be devoted to pollution abatement.
◦ Smith and Jones must be able to reduce pollution at exactly the same cost.