Multiple Choice
One way the government solves problems caused by externalities is by:
84
views
7. Externalities
Public Solutions to Externalities
Multiple Choice
Which of the following public policies addressing externalities is most likely to favor businesses?
A
Tradable permits for pollution control
B
Strict emission standards with heavy fines
C
Imposing high Pigovian taxes on negative externalities
D
Banning all polluting activities
Verified step by step guidance1
Understand the concept of externalities: Externalities occur when a third party is affected by the actions of others, such as pollution affecting the environment and society.
Identify the types of public policies addressing negative externalities: These include tradable permits, strict emission standards with fines, Pigovian taxes, and outright bans.
Analyze tradable permits: These allow businesses to buy and sell pollution rights, providing flexibility and potential cost savings, which can be favorable to businesses.
Consider strict emission standards and heavy fines: These impose rigid limits and penalties, which can increase costs and reduce business flexibility.
Evaluate Pigovian taxes and bans: High taxes increase operational costs, and bans eliminate certain activities, both of which can be less favorable to businesses compared to tradable permits.
Related Videos
Related Practice
