The Control of an Externality in a Tradable Permits System

question 28

Multiple Choice

The control of an externality in a tradable permits system has three components. The first component ________.

• A) is allowing parties to respond to incentives by choosing the most efficient means of abatement
• B) is providing incentives for abatement by internalizing the cost of the harm done by the pollution.
• C) involves reflecting in the prices of goods and services, the costs of abatement and the social costs of the harm from the remaining pollution.
• D) is allowing states to decide how best to decrease dangerous air pollution in the most cost effective manner.

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Definitions:

Seasonal Inventory

Goods or materials stocked in anticipation of seasonal demand variations.

Production System

A system that encompasses all activities required to create a product or service, from raw materials procurement to final output.

Low Demand

A situation characterized by a reduced desire or need for products or services in the market.

Forecasting

The process of making predictions about future events or trends based on historical data analysis or model projections.