In some cases, selling pollution permits is a better method for reducing pollution than imposing a corrective tax because
A)it is hard to estimate the market demand curve and thus charge the "right" corrective tax.
B)selling pollution permits create a net increase in pollution.
C)Corrective taxes distort incentives.
D)Corrective taxes provide greater flexibility to firms that can reduce pollution at a low cost.

Question

Quizplus · Accepted Answer

Selling pollution permits can be more effective because it directly controls the quantity of pollution, whereas estimating the correct level of a tax to achieve the desired pollution reduction can be challenging due to difficulties in accurately determining the market demand curve.

In Some Cases, Selling Pollution Permits Is a Better Method