A policy that directly targets the externality:
A)encourages innovation,which matches the goal to stop production of the externality.
B)gives firms incentives to find different ways to do things,rather than pay for the right to create the externality.
C)is a better long-run solution.
D)All of these statements are true.

Question

Quizplus · Accepted Answer

A policy that directly targets the externality is the best choice because it achieves the goal of stopping the production of the externality. It also encourages innovation and gives firms incentives to find different ways to operate to eliminate the externality, which is a better long-run solution. Therefore, all the statements are true.

A Policy That Directly Targets the Externality