The Third Component of the Control of an Externality in a Tradable

question 15

Multiple Choice

The third component of the control of an externality in a tradable permits system ________.

• A) is allowing parties to respond to incentives by choosing the most efficient means of abatement
• B) involves 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:

Investment

The act of distributing funds or resources with the aim of earning an income or profit.

GDP Deflator

A financial indicator that adjusts the value of output calculated at present prices to constant-dollar GDP, to correct for inflation effects.

Real GDP

The measure of a country's economic output adjusted for price changes (inflation or deflation), providing a more accurate reflection of an economy's size and how it's growing over time.

GDP Deflator

An indicator showing the price levels for all newly created, final goods and services produced within a country's borders.