The Main Advantage of Using Market-Based Schemes for Reducing Pollution

question 89

Multiple Choice

The main advantage of using market-based schemes for reducing pollution is that they

• A)lead to greater fairness in the distribution of resources.
• B)improve the moral fibre of producers and consumers.
• C)lead to a more efficient use of scarce resources.
• D)maximize the difference between marginal cost and marginal benefit.
• E)minimize the difference between total cost and total benefit.

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Definitions:

Avoiding Accidents

Strategies or practices implemented to reduce the likelihood of accidents occurring in various contexts, such as workplaces or roads.

Moral Hazard

The risk that one party to a transaction might change their behavior to the detriment of the other party after the transaction has taken place, particularly when the first party is protected from the consequences.

Adverse Selection

A situation where asymmetric information results in high-risk individuals buying insurance or goods more frequently than low-risk individuals, distorting the market.

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity of the good producers are willing to supply.