Multiple Choice
Which of the following activities is most likely to create a positive externality?
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7. Externalities
Externalities: Social Benefits and Social Costs
Multiple Choice
Which of the following best describes the focus of a command-and-control approach to reducing pollution?
A
Allowing firms to trade pollution permits in a market-based system
B
Setting specific limits or standards for pollution emissions and requiring firms to comply
C
Providing subsidies to firms that reduce their pollution levels voluntarily
D
Imposing taxes on each unit of pollution emitted by firms
Verified step by step guidance1
Understand that a command-and-control approach involves the government directly regulating pollution by setting explicit rules or standards.
Recognize that this approach typically requires firms to meet specific limits on pollution emissions, rather than using market incentives.
Compare this with market-based approaches, such as pollution permits trading or pollution taxes, which rely on economic incentives rather than direct regulation.
Identify that subsidies for voluntary pollution reduction are also incentive-based and not part of command-and-control.
Conclude that the command-and-control approach is best described as setting specific limits or standards for pollution emissions and requiring firms to comply with them.
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