The Difference Between a Corrective Tax and a Tradable Pollution

question 309

Multiple Choice

The difference between a corrective tax and a tradable pollution permit is that

• A)a corrective tax sets the price of pollution and a permit sets the quantity of pollution.
• B)a corrective tax creates a more efficient outcome than a permit.
• C)a corrective tax sets the quantity of pollution and a permit sets the price of pollution.
• D)a permit creates a more efficient outcome than a corrective tax.

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Definitions:

Worker Productivity

The measurement of the efficiency of a worker or group of workers in converting inputs into useful outputs.

Annual Earnings

The total amount of income earned over the course of a year from employment and other sources.

Geographic Imobility

The hindrance or inability of labor forces to move from one region to another in pursuit of job opportunities.

Market Imperfection

A situation where the assumptions of perfect competition are not met, leading to market failure.