Why Are Taxes on Pollutants and Tradable Allowances Considered to Have

question 109

Multiple Choice

Why are taxes on pollutants and tradable allowances considered to have similar effects in solving externality problems?

• A) The companies who are taxed are also simultaneously subject to the allowances of pollutants.
• B) They both reduce pollution of exactly the same types of pollutants.
• C) They both bring markets closer to the efficient quantity.
• D) Companies can trade the taxes on pollutants just as they trade the allowances on pollutant amounts.

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Definitions:

Performance Measures

Metrics or indicators used to evaluate and track the efficiency, effectiveness, and productivity of an organization, employee, or process.

Rewarding Outcomes

Benefits or positive results achieved from specific actions or decisions, often used to motivate behavior or assess the success of projects.

Incentive Contract

An agreement designed to motivate performance by aligning the interests of parties, typically involving rewards for achieving specified objectives.

Additional Risk

Extra exposure to uncertainty or potential financial loss that comes with certain investments or business activities.