In many cases selling pollution permits is a better method for reducing pollution than imposing a corrective tax because
A) it is hard to estimate the market demand curve and thus charge the "right" corrective tax.
B) selling pollution permits create a net increase in pollution.
C) Corrective taxes distort incentives.
D) Corrective taxes provide greater flexibility to firms that can reduce pollution at a low cost.

Question

Quizplus · Accepted Answer

It is challenging to determine the exact level of a corrective tax that would achieve the desired reduction in pollution, whereas selling pollution permits allows the market to find the equilibrium price for pollution reduction.

In Many Cases Selling Pollution Permits Is a Better Method