One way to solve negative externality problems is
A)to organize a limited boycott of the products.
B)subsidize the externalities.
C)eliminate transactions costs when property rights are not legally established.
D)issue pollution permits to polluting firms and establish a system of cap-and-trade.
E)establish and enforce patents and copyrights.

Question

Quizplus · Accepted Answer

Issuing pollution permits to polluting firms and establishing a system of cap-and-trade is an effective way to solve negative externality problems. This system creates a market for pollution permits, which allows firms to trade them among each other. This encourages firms to find the most cost-effective ways to reduce their emissions, which ultimately reduces the negative externality.

One Way to Solve Negative Externality Problems Is