If Transactions Costs Are Very High and Auctions for Pollution

question 14

Multiple Choice

If transactions costs are very high and auctions for pollution permits are not possible, which of the following is the most effective way to deal with pollution?

• A)Allow the parties to negotiate
• B)Tax pollution
• C)Require all polluters to limit their pollution to a certain level with regulation
• D)Give subsidies to reduce pollution

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