In Many Cases Selling Pollution Permits Is a Better Method

question 515

Multiple Choice

In many cases selling pollution permits is a better method for reducing pollution than imposing a corrective tax because

• A) it is hard to estimate the market demand curve and thus charge the "right" corrective tax.
• B) selling pollution permits create a net increase in pollution.
• C) Corrective taxes distort incentives.
• D) Corrective taxes provide greater flexibility to firms that can reduce pollution at a low cost.