Which of the following is a market-based alternative to the Kansas state government's approach to reduce earthquakes as described in the textbook?
A) Impose a tax according to the amount of saltwater injected
B) Impose a tax according to the number of earthquakes
C) Pay a subsidy to homeowners whose houses are damaged by earthquakes
D) Pay a subsidy to oil companies to develop an extraction technology that requires less saltwater

Question

Quizplus · Accepted Answer

Imposing a tax according to the amount of saltwater injected provides a market-based incentive for oil companies to reduce their saltwater injection, as they would face higher costs for injecting larger amounts of saltwater. This encourages them to explore alternative methods of extraction that produce less saltwater and thus reduce the occurrence of earthquakes. While option B (imposing a tax according to the number of earthquakes) may reduce earthquakes, it does not address the root cause of the issue (excessive saltwater injection) and may be seen as punitive instead of market-based. Options C and D involve government subsidies which are not market-based solutions.

Which of the Following Is a Market-Based Alternative to the Kansas