One policy the government can use to remedy the effects of pollution caused by the production of a good is to
A) lower the price of the good
B) create positive externalities to compensate for the negative ones
C) levy a tax on each unit of the good produced
D) create free riders
E) increase the production of the polluting good

Question

Quizplus · Accepted Answer

Levying a tax on each unit of the good produced internalizes the external costs associated with pollution, making producers bear the cost of the negative externalities they create. This can lead to a reduction in the production of the polluting good to a level that is more socially optimal.

One Policy the Government Can Use to Remedy the Effects