In which of the following ways are Pigovian taxes and pollution permits similar?
(i) in both cases, firms pay for their pollution.(ii) both internalise the externality of pollution by making it costly to pollute.(iii) each policy allows for a market-based solution.
A)(i), (ii) and (iii)
B)(i) and (iii) only
C)(ii) only
D)(ii) and (iii) only

Question

Quizplus · Accepted Answer

Both Pigovian taxes and pollution permits make it costly for firms to pollute and internalize the externality associated with pollution. Through these policies, firms pay for their pollution and a market-based solution is established. Therefore, options (i), (ii) and (iii) are all correct.

In Which of the Following Ways Are Pigovian Taxes and Pollution