Subsidies are payments made by the government of a country to: ...

[Alygatorr01285]

Subsidies are payments made by the government of a country to:
 a. foreign firms to encourage imports.
  b. foreign firms to encourage domestic exports.
  c. domestic firms to encourage exports.
  d. domestic firms to encourage imports.
  e. domestic firms to ensure domestic consumption of their goods.

Question 2

How could transferable pollution rights lead to pollution being reduced at the lowest possible opportunity cost?

[essyface1]

Answer to Question 1

c

Answer to Question 2

A policy allowing tradable pollution rights encourages polluters to find cheaper ways to reduce pollution. A firm that is able to reduce its pollution levels can sell its remaining pollution credits to others. The supervising government agency does not need to be informed about the cheapest methods by which a firm can reduce its pollution output. Firms most capable of reducing emissions will do so. Firms with the highest opportunity costs of pollution abatement are likely to purchase rights to pollute from others. This promotes economic efficiency in the attainment of targeted pollution levels.

[Alygatorr01285]

Thanks for the timely response, appreciate it

[kswal303]

Excellent