With tradable emissions permits, the main problem is to determine the _____, while with emissions taxes the main problem is to determine the _____.
A) optimal quantity of pollution; optimal tax rate
B) optimal price of the permits; optimal level of pollution
C) optimal quantity of pollution; marginal social benefit of pollution
D) marginal social cost of pollution; optimal tax rate

Question

Quizplus · Accepted Answer

With tradable emissions permits, the main challenge is to determine the optimal quantity of pollution that should be allowed, as permits are issued for this quantity. With emissions taxes, the main challenge is to determine the optimal tax rate that will lead to the desired reduction in pollution.

With Tradable Emissions Permits, the Main Problem Is to Determine