The difference between a corrective tax and a tradable pollution permit is that
A)a corrective tax sets the price of pollution and a permit sets the quantity of pollution.
B)a corrective tax creates a more efficient outcome than a permit.
C)a corrective tax sets the quantity of pollution and a permit sets the price of pollution.
D)a permit creates a more efficient outcome than a corrective tax.

Question

Quizplus · Accepted Answer

A corrective tax sets the price of pollution, while a tradable pollution permit sets the quantity of pollution. Therefore, option A is correct. Option B and D make comparisons on efficiency, but there is not enough information to determine which one is correct. Option C is incorrect because it misrepresents the roles of corrective taxes and tradable pollution permits.

The Difference Between a Corrective Tax and a Tradable Pollution