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:

Depreciation

The accounting method of allocating the cost of a tangible asset over its useful life.

Accumulated Depreciation

Overall depreciation expense tallied for a fixed asset since it started being used.

Accrued Salaries

Salaries that have been incurred but not yet paid, representing a liability for the company until payment is made.

Salaries Payable

A liability account that represents amounts owed to employees for services rendered but not yet paid.