Consider the cap-and-trade system and the market for tradable pollution permits and answer all parts of the question.
a. If all polluters adopt a more efficient abatement technology, how will it affect the permit price? Will the ambient environmental quality improve as a result of this new abatement technology being used? Explain and illustrate your answer graphically.
b. If the number of polluters increases, e.g., new firms join the polluting industry, how will it affect the permit price? Will the ambient environmental quality deteriorate? Explain and illustrate your answer graphically