One advantage of pollution permits over pollution taxes is
A) pollution permits allow firms to choose their profit-maximizing level of pollution while taxes do not.
B) pollution permits generate more revenue for the government than do pollution taxes.
C) the government can set a maximum level of pollution using pollution permits.
D) none of the above

Question

Quizplus · Accepted Answer

Pollution permits allow the government to set a maximum level of pollution, ensuring that overall pollution is reduced to a predetermined level. Pollution taxes, in contrast, only provide a financial incentive for firms to reduce their pollution levels but do not guarantee an overall reduction in pollution. Additionally, while both pollution permits and taxes provide firms with some flexibility in choosing their pollution levels, permits may be more attractive for firms because they allow them to trade permits with other firms, potentially resulting in lower costs for firms that can reduce their pollution more easily.  Thus, the advantage of pollution permits over pollution taxes is that pollution permits allow the government to set a maximum level of pollution.

One Advantage of Pollution Permits Over Pollution Taxes Is