Which of the following is an advantage of tradable pollution permits?
A)The government knows exactly how much each firm is allowed to pollute.
B)Revenue from the sale of permits is greater than revenue from a corrective tax.
C)The initial allocation of permits to firms does not affect the efficiency of the market.
D)Firms will engage in joint research efforts to reduce pollution.

Question

Quizplus · Accepted Answer

Tradable pollution permits create a market for pollution allowances, in which firms can buy and sell permits to emit a certain amount of pollutants. This market-based approach allows for flexibility and cost-effectiveness in reducing pollution. One of the advantages of tradable pollution permits is that the initial allocation of permits does not affect the efficiency of the market. In other words, it doesn't matter who gets the permits, as there is a market price for them and firms can trade them if they need to emit more or less pollutants. This eliminates the need for the government to determine exactly how much each firm is allowed to pollute, which can be difficult to do accurately. The sale of permits can also generate revenue, which is another potential advantage, but it is not necessarily greater than revenue from a corrective tax. Joint research efforts to reduce pollution are possible with or without tradable permits and are not a unique advantage of this approach.

Which of the Following Is an Advantage of Tradable Pollution