The use of chlorofluorocarbons in refrigerators and air conditioners is alleged to cause the destruction of the ozone layer that surrounds the earth and which protects humans from ultraviolet radiation.Output of this substance has been restricted by a licensing system where producers have to bid in the open market for licenses to produce them in specified quantities.This is an example of dealing with externalities by
A)voluntary compliance.
B)direct controls.
C)taxes.
D)the market mechanism.

Question

Quizplus · Accepted Answer

The licensing system where producers bid for the right to produce chlorofluorocarbons is an example of using the market mechanism to allocate production rights, thereby internalizing the externality.

The Use of Chlorofluorocarbons in Refrigerators and Air Conditioners Is