A Tax on Firms That Emit Pollutants Equal to the External

question 75

Multiple Choice

A tax on firms that emit pollutants equal to the external cost would:

• A)provide firms with an incentive to increase the level of the activity that creates pollution.
• B)provide firms with an incentive to decrease the level of the activity that creates pollution.
• C)provide firms with little incentive to search for production methods that are less environmentally damaging.
• D)not reduce pollution levels at all.
• E)reduce pollution levels to zero.

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Definitions:

Property Use

The manner or purpose for which a property is used, subject to zoning laws and other regulations.

Escrow Account

A financial arrangement where a third party holds funds on behalf of transacting parties until specified conditions are met.

Neutral Third Party

An unbiased, independent individual or group engaged to help resolve disputes, negotiate agreements, or oversee transactions.

Deposit

A sum of money placed in an account or with a third party as a security for the performance of an obligation or the purchase of something.