Which of the Following Is True Regarding Tradable Pollution Permits

question 30

Multiple Choice

Which of the following is true regarding tradable pollution permits and Pigovian taxes?

• A) Pigovian taxes shift the demand curve for the pollution to the left and so lead to a more efficient market solution.
• B) Pigovian taxes and tradable pollution permits create an efficient market for pollution.
• C) Tradable pollution permits efficiently reduce pollution only if they are initially distributed to the firms that can reduce pollution at the lowest cost.
• D) To set the quantity of pollution with tradable pollution permits, the regulator must know everything about the demand for pollution rights.
• E) Pigovian taxes are more likely to reduce pollution to a targeted amount than tradable pollution permits.

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