The Government Can Aid in Reducing Pollution by Using a Policy

question 248

Multiple Choice

The government can aid in reducing pollution by using a policy of cap-and-trade, which means that

• A) polluters are taxed on the amount of pollution they discharge.
• B) emission charges are established by the government.
• C) each polluter is assigned a pollution limit and is given tradable permits that allow this amount of pollution.
• D) only some producers pollute and the others go out of business.

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Definitions:

Monetary Benefit

Financial gains obtained from an action, investment, or decision, quantifiable in terms of money.

Perverse Incentives

Incentives that have unintended and undesirable results, contrary to the interests of the incentive makers.

Aid to Families

Financial or material support provided to families, often by the government, to help them meet their basic needs or improve their living conditions.

Adverse Selection

A situation in which one party in a transaction has more information than the other, typically leading to an inefficient market outcome.