Suppose the federal government implements a system of tradeable permits that lets power plants buy and sell the right to emit sulfur dioxide.This is an example of ________.
A) the Coase Theorem
B) a market-based regulatory approach
C) a Pigovian corrective tax
D) a Pigovian corrective subsidy

Question

Quizplus · Accepted Answer

A tradeable permit system is a type of market-based regulatory approach that uses the power of markets to allocate pollution rights efficiently. Under this system, power plants can buy and sell permits to emit a certain amount of sulfur dioxide. This creates a market for emissions, where the price of the permits is determined by supply and demand. By controlling the overall number of permits available, the government can regulate the total amount of pollution that is emitted while allowing flexibility for firms to determine the most cost-effective way to comply with the emissions standard.

Suppose the Federal Government Implements a System of Tradeable Permits