The Biggest Difference Between Using a Pigovian Tax or a Tradable

question 109

Multiple Choice

The biggest difference between using a Pigovian tax or a tradable allowance to correct for a negative externality is:

• A) the government collect revenues from the tax, and the private parties trade quota rights on their own.
• B) the tax creates an efficient outcome, and the tradable allowances do not.
• C) the tax maximizes total surplus, but the tradable allowances do not.
• D) All of these are differences between the two government policies.

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Definitions:

Little Rainfall

A climatic condition characterized by low precipitation over a period of time, which can influence ecosystems, agriculture, and water resources.

Reindeer

A large type of deer living in the Arctic and Subarctic regions known for their migration in large herds and their domestication in some areas.

Characteristic Climate

The average weather conditions, including temperature, precipitation, and wind, typically found in a particular region over a long period.

Ecosystems

Communities of living organisms interacting with their physical environment, functioning as a unit in nature.