Effective strategies for addressing the problem of negative externalities include
A)taxing the profit of polluting companies at twice the rate of non-polluting companies.
B)imposing taxes on the activity that generates the pollution.
C)stressing the use of renewable resources.
D)imposing recycling laws.
E)closing down a polluting industry.

Question

Quizplus · Accepted Answer

Imposing taxes on the activity that generates the pollution is an effective strategy for addressing negative externalities. It creates an incentive for the polluting companies to reduce their emissions and explore cleaner alternatives. This tax revenue can also be utilized to fund research and development for cleaner technologies. The other options may be effective in reducing pollution, but may not provide an adequate solution to address the negative externality. Imposing heavier tax rates on polluting companies compared to non-polluting companies may discourage some companies from starting up, but it may also lead to less competition and innovation in the market. Stressing the use of renewable resources and imposing recycling laws are also effective in reducing pollution, but may not address the negative impact that has already occurred. Lastly, closing down a polluting industry is not a desirable option as it could lead to job losses and economic consequences.

Effective Strategies for Addressing the Problem of Negative Externalities Include