A benefit of taxes over regulation to internalize externalities is
A) it is easier to choose the optimal amount of taxes than the optimal amount of regulation.
B) regulations are more difficult to impose than taxes.
C) taxes equate the social costs with the social benefits.
D) taxes provide incentives to adopt new methods to reduce the externality.

Question

Quizplus · Accepted Answer

Taxes provide a financial incentive for firms to innovate and adopt new methods to reduce the externality, as they can lower their tax burden by reducing the negative externality they produce.

A Benefit of Taxes Over Regulation to Internalize Externalities Is