If a government wants to efficiently reduce a widespread negative externality like air pollution, it must know the costs of pollution abatement of the Individual polluters. However, this Information is difficult to obtain directly. Tradeable emissions permits are one way to solve the asymmetric Information problem affecting pollution abatement efforts. Fill in the blanks to explain how this is possible. a. Because the permits are tradeable, firms with (Click to select) Vabatement costs will sell some of their permits to firms with (Click to select) Vabatement costs. b. Now consider that even after a firm has sold Its permits, It must still reduce its pollution output. Since those who sell their permits would have (Click to select) Vabatement costs, the negative externality is reduced at (Click to select) possible cost to society.
