Which of the following statements is (are) TRUE?
I. A quota can be used to address negative externalities only, not positive externalities.
II. Implementing pollution quotas is difficult because quotas must be implemented on a firm-by-firm basis.
III. The government could produce the good itself as a method of increasing the quantity of a good with a positive externality.
A) II
B) I and III
C) I, II, and III
D) II and III

Question

Quizplus · Accepted Answer

Quotas can be used to manage both negative and positive externalities, not just negative ones, making statement I false. Implementing pollution quotas can be challenging due to the need for firm-specific application, making statement II true. For goods with positive externalities, government production is indeed one method to increase their quantity, making statement III true.

Which of the Following Statements Is (Are) TRUE