A Major Problem with Using a Tradable Emission Allowances System

question 32

Multiple Choice

A major problem with using a tradable emission allowances system to control pollution is

• A)that it grants firms a license to pollute.
• B)the difficulty in determining the emissions target.
• C)it discourages firms from implementing cost-effective pollution control technology.
• D)that it does not eliminate pollution completely.

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Definitions:

Aggregate Supply

The total supply of goods and services that firms in an economy plan on selling during a specific time period.

Government Intervention

The direct or indirect involvement of governmental actions in the market to influence the economy, correct market failures, or protect the public interest.

John Maynard Keynes

A British economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments, emphasizing the importance of government intervention during economic downturns.

Milton Friedman

An influential American economist known for his strong belief in free-market capitalism and for winning the Nobel Prize in Economic Sciences in 1976.