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:

Interest Expense

Costs incurred by an entity for borrowed funds, typically presented as a line item on the income statement.

Quick Ratio

A liquidity measure that indicates a company's ability to cover its short-term liabilities with its most liquid assets, excluding inventories.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year by comparing current assets to current liabilities.

Account Receivable

Money owed to a company by its customers for goods or services that have been delivered but not yet paid for.