Question

Economists argue that appropriate corrective taxes or tradable pollution rights will result in efficient pollution reduction.Which of the following statements supports this claim? Check all that apply.A. The government does not have to figure out which firms can reduce pollution the most.B. Corrective taxes or tradable pollution rights give firms greater incentives to reduce pollution.C. With corrective taxes or tradable pollution rights, firms spend less in research on pollution control.

Answer 1

A. The government does not have to figure out which firms can reduce pollution the most.

B. Corrective taxes or tradable pollution rights give firms greater incentives to reduce pollution.

Corrective taxes or tradable pollution rights give firms greater incentives to reduce pollution. Firms are rewarded by paying lower taxes or spending less on permits if they find methods to reduce pollution, so they have the incentive to engage in research on pollution control. The government does not have to figure out which firms can reduce pollution the most—it lets the market give firms the incentive to reduce pollution on their own. See Sections: Market-Based Policy 1: Corrective Taxes and Subsidies; and Market-Based Policy 2: Tradable Pollution Permits.