Question

Effective strategies for addressing the problem of negative externalities include

A) taxing the profit of polluting companies at twice the rate of non-polluting companies.
B) imposing taxes on the activity that generates the pollution.
C) stressing the use of renewable resources.
D) imposing recycling laws.
E) closing down a polluting industry.

Answer 1

Effective strategies for addressing the problem of negative externalities include taxing polluting activities, imposing recycling laws, and closing down polluting industries.

Step-by-step explanation:

Effective strategies for addressing the problem of negative externalities include:

1. Imposing taxes on the activity that generates the pollution. By implementing taxes on polluting activities, firms will face an additional input cost, which will incentivize them to reduce pollution and choose the social optimum.
2. Imposing recycling laws. By enforcing laws that require recycling, the amount of waste and pollution generated can be reduced.
3. Closing down a polluting industry. In extreme cases, closing down an industry that is causing significant pollution can effectively address the issue.