Which of the following statements is true?
A) Unlike other marginal cost curves, the marginal cost curve for pollution emissions is downward sloping.
B) Command and control is the favored approach of economists for eliminating pollution.
C) To be effective, emission taxes need to exceed the marginal cost of emissions.
D) Emissions taxes are an effective way to reduce pollution.

Question

Quizplus · Accepted Answer

Emissions taxes are often viewed as an effective way to reduce pollution because they create a financial incentive for firms to reduce their emissions to avoid paying the tax. This helps internalize the external cost of pollution and can lead to a more efficient outcome. However, the tax rate needs to be set correctly in order to be effective - if the tax rate is too low, it may not provide enough of an incentive to reduce emissions, and if it is too high it may lead to unintended consequences such as firms relocating to countries with less strict environmental regulations.

Which of the Following Statements Is True