The Downside to Targeting Specific Activities Rather Than the Externality

question 32

Multiple Choice

The downside to targeting specific activities rather than the externality itself is:

• A) it risks misaligning the incentives that producers and consumers face with the goal of minimizing the externality.
• B) it requires a number of different activities to be identified and several different policies to be written, which can be cumbersome and difficult to manage.
• C) any one activity is likely to not make a significant difference in the presence of an externality.
• D) All of these statements are true.